Electronics and IT distributor
) recently announced that it will acquire German distributor of
electronic components (embedded computing technology and display
solutions), MSC Investoren GmbH (or MSC Group). Financial details
of the deal were kept confidential. The acquisition reflects
further strengthening of Avnet's core business of distributing
Per the deal, Avnet will initially hold the majority of MSC
Group's shares, while the remaining would be acquired some time
later (time not specified). On completion of the merger
transaction, Avnet will be able to integrate MSC Group's
distribution and supply chain services with its capabilities.
Apart from owning an enhanced product portfolio, Avnet will be
better positioned to meet growing demand for electronic solutions
in the European industrial electronics market. The addition will
also help Avnet to boost its margins. The transaction, which is
awaiting certain regulatory approvals, is expected to 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 to be achievable, given MSC Group's
solid revenue generation of more than $450.0 million in fiscal
Earlier, in June, Avnet acquired N.J.-based cloud and data center
automation service provider, Seamless Technologies for an
undisclosed sum. Seamless' capabilities will smoothly integrate
with Avnet's solutions, allowing it to deliver and implement
large-scale private/hybrid/public clouds. Additionally, the
broadening of cloud services will help to attach more value to
hardware and will allow its partners to be more profitable.
Earlier this year, Avnet acquired RTI Holdings Ltd. and TSSLink
and solidified its service portfolio.
Distribution companies usually operate on razor-thin margins.
Therefore, there are only a couple of ways to grow in this
market. One of the most fruitful ways is through accretive
During 2012, the company acquired as many as 13 new units. These
acquisitions are expected to augment the company's product
portfolio and enhance its performance quite comprehensively going
Avnet sees significant competition for both its domestic and
foreign operations. It has an archrival in
Arrow Electronics Inc.
), although other big players such as
Anixter International Inc.
Richardson Electronics Ltd.
) are also not to be discounted.
Currently, Avnet has a Zacks Rank #3 (Hold).
ARROW ELECTRONI (ARW): Free Stock Analysis
AVNET (AVT): Free Stock Analysis Report
ANIXTER INTL (AXE): Free Stock Analysis
RICHARDSON ELEC (RELL): Free Stock Analysis
To read this article on Zacks.com click here.