Synnex Corp chief executive Kevin Murai is even more confident after meeting the Westcon Americas team that his company's proposed acquisition will increase value for vendors and channel partners alike.
"Spending additional time [with Westcon-Comstor] has only validated my belief regarding the common vision and value we bring to the markets," Murai told Wall Street analysts Thursday. "Our teams are energised, and they realise we must keep raising the bar to continue to exceed our partner and customer expectations."
Murai said the US$830 million deal would provide Synnex's existing channel partners with a global platform, and provide them with access to deep capabilities and strength in the security, networking, and unified communications and collaboration market. Synnex doesn't have any presence in Latin America today.
Murai said the distributor will decide closer to the closing date whether to pay for Westcon Americas with 4.56 million shares of Synnex stock or US$500 million in cash. The deal also includes a mandatory US$130 million cash payment, as well as an earn-out of up to US$200 million if certain financial targets are met through February 2018.
Synnex will access the overall availability of credit when assessing whether to pay for Westcon Americas using cash or stock, Murai said. Going the stock route would give Westcon parent Datatec – which will continue to own and operate Westcon in Europe, the Middle East, Africa and Asia-Pacific – a 10.25 percent stake in Synnex.
"We only have that choice if the stock is above a certain level, which today it is, but there are other factors other than the economics and the stock price," Murai said.
Synnex is only allowed to substitute cash for stock if its stock is trading above US$113.78 for 20 consecutive days leading up to the deal's close, according to the share purchase agreement. The company's stock has been trading above that amount since June 6, when the acquisition was announced.
Synnex saw revenue in the quarter ended 31 May climb to US$3.94 billion, up 16.5 percent from US$3.38 billion last year. That beat Seeking Alpha's estimate of US$3.72 billion.
Net income soared to US$73.1 million, or US$1.83 per diluted share, up 64.9 percent from US$44.4 million, or US$1.11 per diluted share, last year. On a non-GAAP basis, net income jumped to US$83.2 million, or US$2.08 per share, up 51.9 percent from US$54.8 million, or US$1.37 per share, last year. That crushed Seeking Alpha's projection of US$1.79 per share.
Synnex's stock inched ahead US$0.62 (0.51 percent) to US$122.46 in after-hours trading. Earnings were released after the market closed Thursday.
In the most recent quarter, Synnex's technology solutions sales climbed to US$3.46 billion, up 13.5 percent from US$3.05 billion last year thanks to strength in networking, security and software sales. Operating income for the division skyrocketed to US$101.7 million, up 34.1 percent from US$75.8 million the year prior.
Next quarter, Synnex said it expects non-GAAP earnings of US$78.1 million to US$81.1 million – US$1.94 to US$2.02 per share – on revenue of US$3.9 billion to US$4.1 billion.