Roy Vallee, the CEO of Avnet had two main reasons for the acquisition of Bell Microproducts. The first was to make money for shareholders and the second is that Avnet was attracted to BellMicro’s data center and embedded computing businesses.
He added that Avnet will be considering headcount reductions although the details are not done yet. “The basic intent is to combine our back office operations and retain as many people as possible who are involved with customers and suppliers and that is a pattern we have followed with previous acquisitions,” Vallee said.
Employee reductions will not necessarily all come from the BellMicro side, Vallee said. Avnet will start a process of identifying the jobs that will be consolidated shortly. “We embrace a mantra of best people and practices. The reductions will not all come from the Bell side of the acquisition and will be about the particular job,” Vallee said.
Integration plans will include both Canadian subsidiaries and expect existing operations on the data center business, commercial business and the embedded systems business to be merged.
Vallee, who also serves as Chairman of the Board, explained the debt acquisition strategy for acquiring BellMicro. “When we looked at the value of this company and we thought of the debt and the equity combined.
There is about US$250 million in equity and about US$350 million in debt. Avnet will take full responsibility for the debt. Last year BellMicro paid about US$33 million in interest expenses. We will use cash and credit to pay off 100 per cent of BellMicro’s debt and this will reduce the interest expenses,” he said.
Vallee believes Avnet is buying BellMicro at the right time. He added that the storage-centric distributor has gone through many distractions in the past three years from having its stock delisted to accounting troubles the made the company financially constrained. “When you look at what BellMicro has accomplished it is a tribute to the people of the company. I believe without those distractions and our resources the BellMicro team will be in a position to deliver exciting results,” he said.
When the deal closes, Prosys will be run separately under company COO Rick Hamada’s watch. But, Vallee said that Avnet would like to sell Prosys to a strategic buyer under the proviso they would continue to acquire products from Avnet.
Other aspects of the deal for Avnet include opportunities in Latin America and Europe as well as expanding its presence in the hard drive disk market. In the embedded space, Vallee believes the combined distributors have the potential to grow the business to well over $1 billion dollars in revenue.