Distribution Shakeup: Synnex To Buy Westcon-Comstor's Americas Business For Up To $830M

Synnex will burst onto the Cisco scene by purchasing Westcon-Comstor's $2.18 billion North American and Latin America businesses for as much as $800 million.

The Fremont, Calif.-based distributor said it will pay an additional $30 million for a 10 percent stake in Westcon-Comstor's $2.35 billion international business, which includes Europe, the Middle East and Africa, and Asia-Pacific. Synnex will have the option to acquire an additional 10 percent interest in Westcon International for another $30 million, the companies said.

"We believe this is a unique opportunity that is transformational to Synnex and is aligned to our strategy of positioning the business to where technology is growing," Kevin Murai, Synnex's president and CEO, said in a statement. "Westcon-Comstor is a recognized leader in the security, UCC and networking space."

[RELATED: Raymond James: Synnex, Arrow Most Likely Candidates to Buy Westcon-Comstor]

Synnex had been the only North American broadline distributor not carrying Cisco, while 44 percent – or $2.16 billion – of Westcon's sales come from its Cisco-exclusive Comstor business. The acquisition is expected to close in the third quarter of 2017.

Westcon-Comstor said its Americas and International businesses will operate under a single go-to-market structure to ensure that its vendor partners and solution providers receive the same levels of service with no disruption.

"Our customers will gain access to complementary technology solutions and businesses services that open up new opportunities to accelerate growth," Dolph Westerbos, CEO of Westcon-Comstor, said in a statement. "Their breadth of customers and technology solutions will be a tremendous benefit to our portfolio."

Datatec Ltd., the parent company of Westcon-Comstor, will also acquire a minority equity share in Synnex. Datatec CEO Jens Montanana also plans to join Synnex's board of directors, subject to compliance with legal and regulatory requirements.

"Westcon-Comstor North America will benefit substantially from being part of a bigger businesses with a much larger addressable market – and so will our shareholders [with] our stake in Synnex," Montanana said in a statement. "Post-transaction, the Westcon-Comstor businesses with work seamlessly together for our vendors and customers globally."

Datatec will hold a 10.25 percent stake in Synnex, according to the company. The deal will allow Westcon-Comstor International to better align its regional resources and seek new opportunities for growth, the company said.

Datatec's stock is up $0.72 (17.98 percent) to $4.69 per share since the announcement was made early Tuesday. That's the highest price at which the company's stock has traded since October 2015.

Datatec's board considers it to be an optimal time to sell Westcon International since the division's financial and operational performance has been materially affected over the last 12 months by the rollout of its SAP Enterprise Resource Planning system and business process outsourcing, Datatec said.

Synnex will have the right to representation on Westcon International's board, Datatec said. The distributor will also be allowed to purchase an additional 10 percent stake in Westcon International within 12 months after the deal closes, the company said.

Synnex's payout for the deal will include $630 million at closing and an additional $200 million cash earn-out payment subject to Westcon Americas performance in the company's 2018 fiscal year, which will end Feb. 28, 2018.

The $630 million includes $130 million in cash and $500 million of Synnex shares. Synnex will also have the option to settle its share component in cash, the company said.

The announcement follows months of speculation about the fate of Westcon-Comstor. Datatec announced in January that it was negotiating a material transaction, with sources telling CRN at the time that the most likely outcome was the sale of Westcon-Comstor.

Datatec revealed in early April that it was indeed in talks to sell a major portion of Westcon-Comstor for more than $800 million.