WESCO’s courtship of Anixter International, Glenview, IL, took another interesting turn this week when the wire and cable giant’s board of directors gave the thumbs up to WESCO’s revised acquisition offer.
Sam Zell, Anxiter’s chairman, said in a Jan. 9 Anixter press release that, “After careful review and consideration and consultation with our financial and legal advisers, the board of Anixter has determined that the current WESCO offer is superior to the existing CD&R agreement.”
Private-equity firm Clayton, Dubilier & Rice (CD&R), acquired Anixter in Oct. 2019 in an all-cash transaction valued at approximately $3.8 billion and $81 per share. Since that time, CD&R has entertained acquisition offers for Anixter, including a series of proposals from WESCO International. The most recent press release said in part, “The Anixter board of directors determined that an offer from WESCO constitutes a ‘superior company proposal’ as defined in Anixter’s previously announced definitive agreement and plan of merger with an affiliate of CD&R.
“Under the terms of WESCO’s revised offer, WESCO would acquire Anixter for nominal consideration of $100 per share, reflecting an enterprise value of approximately $4.5 billion including net debt. The proposed consideration consists of $70 per share in cash, 0.2397 shares of WESCO common stock, and $15.89 per share in face amount of WESCO perpetual preferred stock.
“WESCO has told Anixter that the perpetual preferred stock is expected to be listed on the New York Stock Exchange, will be non-callable for five years and will pay dividends at a fixed rate subject to reset every five years. WESCO has also informed the company that the proposed acquisition of Anixter will not require the approval of WESCO’s stockholders.
“Anixter has notified CD&R of the Anixter board’s determination and, pursuant to the CD&R merger agreement, CD&R has the option for the next five business days to negotiate an amendment of that agreement so that WESCO’s offer will no longer be a superior company proposal.
“Under the CD&R merger agreement, Anixter is required to pay a $100 million termination fee to CD&R if the Anixter board terminates the CD&R merger agreement in order to enter into an agreement with WESCO. WESCO has agreed to pay the termination fee on Anixter’s behalf in such event.
“At this time, Anixter remains subject to the CD&R merger agreement and the Anixter board has not changed its recommendation in support of the CD&R transaction or the existing CD&R merger agreement, or its recommendation that Anixter’s stockholders adopt the CD&R merger agreement.
“There can be no assurances that a transaction with WESCO will result from WESCO’s offer, or that any other transaction will be consummated. There can be no assurance that CD&R will seek to negotiate with Anixter or will make a revised offer.”
A Jan. 9 WESCO press release said, “Based on the number of shares of WESCO and Anixter common stock currently outstanding, it’s anticipated that WESCO stockholders would own 84%, and Anixter stockholders 16%, of the combined company. The value opportunity for Anixter’s stockholders is at least $115 per share when taking into account $100 in nominal consideration proposed by WESCO, the Anixter stockholders’ share of greater than $200 million of capitalized synergies, potential multiple re-rating of WESCO’s common stock and the value of the downside protection mechanism.”
In his comments on WESCO’s revised offer, John Engel, WESCO’s chairman, president and CEO, said in the press release, “WESCO’s proposal to acquire Anixter provides significant immediate value to Anixter’s stockholders along with the opportunity for both companies’ stockholders to benefit in the upside of this transformative combination. We are pleased the Anixter board has determined our latest proposal represents a superior company proposal and look forward to executing a merger agreement.”
A previous WESCO press release said the combined company would have pro forma 2019 estimated revenues of approximately $17 billion. WESCO would also have increased international exposure, with approximately 9% of revenues generated outside of the U.S. If the two companies get together, their combined revenues would vault them into the top position in Electrical Wholesaling’s Top 200 listing, which is currently occupied by Sonepar and its $10 billion-plus in 2018 North American revenues.