UPDATE 2-Avnet to sell IT business to Tech Data for $2.6 bln
(Adds CEO quote, background on deal)
Sept 19 (Reuters) - U.S. electrical components distributor Avnet Inc said it would sell its IT business to technology products distributor Tech Data Corp for about $2.6 billion, in a deal that was welcomed by both sets of shareholders.
Avnet, whose IT business has competed with Tech Data for years reselling computers and data center products, said it would receive $2.4 billion in cash and 2.8 million Tech Data shares, which is about a 7 percent stake in the company.
Tech Data's shares closed 22.3 percent higher at $84.80 while Avnet's shares closed 6.84 percent higher at $41.89.
Without the technologies solutions business, Avnet will now be able to focus on what it called high growth areas of marketing electronic components and other products in the supply chain. Avnet said it expects to realize a gain of $3.75 to $4.75 per share after the cash-and-stock deal closes.
While Tech Data got its start selling printers and computers, it has refocused its business over the past decade providing data center products such as storage and networking products. This has become a business with more than $8 billion a year in revenue and the deal to acquire Avnet's IT business will further expand this area, according to Tech Data Chief Executive Bob Dutkowsky.
Dutkowsky said in an interview that his company will now be able to provide products "from the living room to the data center and all points in between, from cell phones to WiFi networks."
"None of our competitors will have what we have when we put the pieces together," he said.
The companies have been speaking for about a year about a transaction, according to a source familiar with the deal.
Tech Data competes with companies such as Synnex Corp and Arrow Electronics Inc. Its competitor, Ingram Micro Inc, agreed to be acquired by China's Tianjin Tianhai, a shipping company owned by China's HNA Group, earlier this year. That deal is awaiting regulatory approval and is up for review by the Committee on Foreign Investment in the United States.
Tech Data said it expects to realize about $200 million in present value of tax benefits. It also expects to generate about $100 million in annualized cost savings two years after the deal closes.
The transaction is expected to close in the first half of 2017.
Citi and Allen & Co LLC are Avnet's financial advisers. Bank of America Merrill Lynch and Raymond James & Associates advised Tech Data.
(Reporting by Liana B. Baker in San Francisco and Aishwarya Venugopal in Bengaluru; Editing by Savio D'Souza and Phil Berlowitz)
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