Synnex Corporation's blockbuster US$830 million investment in Westcon-Comstor could be the first step for the US distributor to increase its presence in the Australian market.
The deal, announced yesterday, drove a major share price spike for Westcon-Comstor's parent, Datatec, while creating "enthusiasm and excitement" for the Australian business.
Johannesburg-based Datatec, which turns over more than US$6 billion, saw its share price surge more than 20 percent on the news that Synnex Corp would spend US$800 million to acquire 100 percent of Westcon-Comstor in North American and Latin American and a further US$30 million for a 10 percent stake in two other regions, Asia-Pacific and Europe, the Middle East and Africa.
While US-headquartered Synnex Corp did not spell out concrete plans to grow its local footprint beyond that 10 percent, the company did tell investors it now had a "pathway for expansion globally". Australian disties will be watching closely.
Synnex Corp's 10 percent stake creates a new "strategic partnership with Westcon-Comstor EMEA and APAC businesses, enabling a seamless global experience for partners."
Asked about international growth plans, Synnex Corp chief executive Kevin Murai the deal "does give us a good pathway to look at expansion opportunities beyond just the Americas".
Synnex Corp has the option to acquire an additional 10 percent of Westcon-Comstor's international business at the same price for up to one year after the deal closes. "And then we do have certain first rights of refusal should an offer come in on all or part of the rest of the business," said Murai.
Synnex Corp is a US$14 billion distributor listed on the New York Stock Exchange and has only a tenuous connection to Synnex Australia. Matthew Miau, chairman of Taiwanese corporation Mitac-Synnex, the ultimate parent of Synnex Australia, is also on the Synnex Corp board.
"Synnex Corporation is an entirely different organisation to Synnex Australia," said David Gage, Westcon-Comstor's Australian managing director.
"The 10 percent stake is significant in that it shows Synnex Corporation believes in Westcon-Comstor’s global footprint as well as our transformational journey; the potential for further value creation; and in establishing a pathway for them to expand beyond the Americas."
Synnex Corp's 10 percent stake brings yet another American distributor to Australian shores. The company joins US competitors Tech Data and Arrow, which have both built up Australian footprints through the respective acquisitions of Avnet Technology Solutions and Distribution Central.
This week's US$830 million deal creates a scenario where two different disties with the Synnex name are both invested in Australia. However, it is understood Westcon-Comstor will keep its existing moniker in all regions.
"Westcon-Comstor will continue to operate as one global brand. This deal will significantly extend our capabilities in cloud IoT, services and the technologies we deliver for our customers," said Gage.
Australia's largest homegrown distie, Dicker Data, will be watching this latest development with interest. The company is no stranger to M&A, following its 2014 acquisition of Express Data – which at the time was run by David Gage.
"It was clear even when I was leading Express Data that consolidation had to happen and it has played out that way over the past few years," said Gage. "The exciting factor about this deal is that I really feel it’s a great match of two disties that complement each other very well."
What rivals think
CRN asked some of Westcon-Comstor's Australian competitors for their verdict on the news.
Dicker Data founder and chairman David Dicker did not expect the 10 percent stake in EMEA and APAC to have much impact locally, but added, "I'd expect to see those parts of Westcon on the market in the not-too-distant future."
Nick Verykios, whose Distribution Central business was acquired by Arrow in March 2016, was not surprised, but said he had expected "a complete acquisition rather than partial”.
“From a trading perspective, I don’t expect things to really change much. They’re very different organisations. They’ll probably continue to operate with just some equity changes.
“We’re eager to see what it all means but I don’t think it will be much because it’s just an equity change in terms of ownership for APAC and Australia. That’s my expectation and we’ll probably know more when they tell us.”
Datatec announced in April it was in talks to sell a major portion of US$4.5 billion Westcon-Comstor for more than US$800 million.
Gage told CRN: “After the speculation over the past few months it’s great to have a definitive agreement in place. I announced the deal today to the Australian team and there is enthusiasm and excitement across the local business.”
Synnex positioned the deal as "highly complementary" thanks to only minor overlaps between the two disties.
Synnex Corp centres on server, storage and PCs and counts Microsoft, HP, HPE, Lenovo and Dell EMC as major vendor partners.
Westcon-Comstor's line card focuses around networking, security and unified communications, and includes Cisco, Symantec, Juniper, Palo Alto and VMware.