Avnet Closes MSC Acquisition
Per the deal inked in mid-2013, electronics and IT distributor, Avnet Inc. (AVT), has acquired the remaining share in MSC Investoren GmbH (or MSC Group). MSC is a German distributor of electronic components (embedded computing technology and display solutions).
Earlier in Jul 2013, Avnet announced the acquisition of MSC Group through a two-part process. Avnet acquired the majority of MSC Group’s shares in Oct 2013.
Avnet will integrate MSC Group’s distribution and supply chain services with its current operations. Apart from owning an enhanced product portfolio, Avnet will be better positioned to meet the growing demand for electronic solutions in the European industrial electronics market.
The addition will help Avnet to boost its margins. The acquisition will also be accretive to Avnet’s earnings per share, helping it to achieve long-term return on capital (ROC) of 12.5%. The earnings accretion expectation seems achievable given MSC Group’s solid revenue generation of more than $450.0 million in fiscal 2012.
Apart from this, Avnet has been entering into partnerships with various IT and semiconductor companies to expand its portfolio that will place it in a strong position in the enterprise software market compared to its prime competitor Arrow Electronics (ARW).
The recent agreements with SanDisk (SNDK), TechNexion and Cisco (CSCO) are expected to be beneficial for the company in the long run.
We remain optimistic about Avnet’s leading position in electronics distribution, continuous cost cutting initiatives and acquisition synergies. The company’s prudent acquisitions have enabled it to expand its product portfolio and add to its revenue streams.
However, a sluggish macroeconomic environment coupled with a tepid IT spending projection and competition from other electronic component distributors remain headwinds, going forward.
Currently, Avnet has a Zacks Rank #3 (Hold).
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