Anixter International Inc. (NYSE: AXE) announced that it has entered into a definitive agreement to acquire the Power Solutions segment of HD Supply for $825 million, subject to customary post-closing working capital and other adjustments.
The acquisition, which is the largest in Anixter’s history, is expected to be accretive to earnings in the first full year of operation, exclusive of transaction, one-time integration expenses and incremental amortization of intangible assets. The acquisition is expected to result in future tax benefits from acquired U.S. intangible assets with a net present value estimated to be approximately $70 million.
“This acquisition combined with the September 2014 acquisition of Tri-Ed and the June 2015 sale of our OEM – Supply Fasteners segment completes a transformation of our global platform and results in a portfolio that is well-positioned for substantial and sustainable long term growth,” said Ted Dosch, Executive Vice President and Chief Financial Officer of Anixter. “With our attention now focused on the successful integration of these businesses and maximizing their synergistic value, we expect to generate significant free cash flow to support our balanced capital allocation strategy, including a return to our long term target of 45-50 percent debt-to-total capital ratio within the short to medium term.”
Headquartered in Atlanta, Power Solutions distributes over 200,000 utility, electrical and industrial MRO products to approximately 13,000 customers including investor-owned utilities, public power utilities, electrical contractors and industrial businesses. Operating from a broad geographic footprint of approximately 130 branches in 30 U.S. states and 4 Canadian provinces, Power Solutions reported fiscal 2014 revenue of $1.9 billion and adjusted EBITDA of $79 million.
“Power Solutions is a compelling strategic acquisition for Anixter. Consistent with our message that we are sharpening our focus, this transaction will significantly enhance our competitive position in the electrical wire and cable business and further strengthen our customer and supplier value proposition. In addition to transforming our existing utility business into a leading North American distributor to the utility sector, this acquisition will enable us to provide a full line electrical solution to our existing customers and will provide us with broader access to the mid-size electrical construction market,” said Bob Eck, President and Chief Executive Officer of Anixter. “Like Anixter, Power Solutions has built their business on providing complex supply chain services and value added distribution to their customers. We look forward to the talented Power Solutions team joining the Anixter family when the transaction closes. Together, we will offer broader solutions to our respective customers and substantial long-term growth and value creation for all Anixter stakeholders.”
Subject to regulatory approval and certain customary closing conditions, this transaction is expected to close near the end of the third quarter of 2015 and will be financed using available cash and additional borrowings. We expect to have full commitment on financing in place prior to closing. The majority of transaction and integration costs will be incurred in fiscal years 2015 and 2016. Additional financial details will be provided in our second quarter 2015 earnings release on July 28, 2015.
John Tisera, President of Power Solutions, added, “We are excited to have access to Anixter’s broad portfolio of products, services and technical expertise which will allow us to further expand our customer offerings. The strategic rationale of this combination is strengthened by our shared culture of partnering with both our customers and world-class suppliers to bring value to their businesses.”
Greenhill & Co., LLC served as financial advisor, Skadden, Arps, Meagher & Flom LLP served as legal counsel, and KPMG LLP served as accounting advisor to Anixter on the transaction.