Tech Data Corp (NASDAQ:TECD) is buying Avnet Inc.’s technology solutions group in a deal valued at $2.6 billion to expand into Asia and pursue newer products focused on the cloud and data centers. Its shares surged the most in 17 years.

 

 

Tech Data will pay $2.4 billion in cash plus shares valued at about $200 million, Phoenix-based Avnet said in a statement Monday. When the transaction closes, expected in the first half of 2017, Avnet projects a gain of $3.75 to $4.75 a share. Clearwater, Florida-based Tech Data said the deal will add significantly to earnings in the first year after closing,

Bob Dutkowsky, Tech Data’s chief executive officer, said in a telephone interview that distributors remain an important and efficient sales channel for technology products, noting that hardware makers like Dell Inc., which had once sold only direct-to-consumer, have moved back to using distributors like Tech Data and that customers increasingly wanted “one-stop shopping” for all their software and technology needs.

Dutkowsky said the purchase is necessary to keep his company relevant as business technology is increasingly focused on cloud-delivery, mobile, intelligent cars and the Internet of Things.

“All of the motion in technology was moving away from the sweet spot we had lived in, which was in the office, on the desktop,” he said, adding that in a 30-year career in technology he had never seen the pace of change as quick as it is today. “This purchase extends our footprint and gives us skills we don’t have today and positions us for the next wave of technology.”

Tech Data Equity Analysis

Tech Data Corp (NASDAQ:TECD) opened trading today as $83.21 and is trading in the range of 76.50-85.50 today. Tech Data’s current market cap stands at $2.93 Billion.

Tech Data is currently covered by 9 Wall Street analysts.  The mean target price is $74.25 according to First Call.  This presents a solid downside to the current price of the equity.  The Mean Recommendation sits at 3.1 which is based on 1 Strong Buy and 6 Hold ratings.

The most recent analyst actions consisted of BofA/Merril upgrading the stock on August 30th.

The current quarter EPS consensus estimate is 1.26 with revenue estimates of 6.37B.  Sales are expected to drop at a 0.90% rate. Tech Data reported actual earnings last quarter of 1.42 which fails to beat the 1.43 consensus estimate, a -0.70% surprise.

Corporate Profile

Tech Data Corporation is a wholesale distributor of technology products. The Company serves as a link in the technology supply chain by bringing products from the technology vendors to market, as well as providing its customers with logistics capabilities and services. It operates through the segment of distributing technology products, logistics management and other value-added services. It operates in two geographic segments: the Americas and Europe. It provides resellers training and technical support suite of electronic commerce tools customized shipping documents product configuration or integration services and access to financing programs. Its customers include value-added resellers, direct marketers, retailers and corporate resellers who support the diverse technology needs of end users. It sells its products to customers in approximately 100 countries throughout North America, South America, Europe, the Middle East and Africa.

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