Anixter Resisting Takeover From Competitor, Bidding War Emerges, Wesco Wins

By John Honovich and Charles Rollet, Published Jan 13, 2020, 12:09pm EST (Info+)

Mega distributor Anixter is going to be acquired but by whom?

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Initially, Anixter planned to go private, being bought by a private equity firm. Now, a new bidder, Wesco, has come along that has topped the private equity's firm price. But Anixter is resisting so far.

In this note, we examine what is happening, who the competitor may be (ADI/Resideo, Ingram Micro, TechData, Rexel, Wesco, etc.) and how this may impact the future of the company.

Update January 2nd and 3rd: We have added coverage on the increased rounds of bidding between Wesco and CD&R.

Executive *******

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Competitor ********

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Why ******?

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*******

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UPDATE *** ****: **** *** ******

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** **********, *** **** ** *** backing *** **&* **** *** * vote ** ******** **** ** ***** the ****.

*************, *** ************ **** **** **** CD&R ***** ** **** *** ****** and *** *** ***** ** *********** with ******* *** **** ***** *******:

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UPDATE *** ***: **&* ****** **** ***** *********** ***** ********

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UPDATE *** ***: ***** *** ******, ********

***** ** *** ****** **, ********** their ***** **** $**.** ** $**.**,****** ***** *****:

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UPDATE: *** ***: ******* ********, **** ***** $*** ********

********* ***** ******** ********,******* *** *** ******** ************ *****'* $*** ***** ***** ** a "******** ******* ********" **** **&* $97 ***-**** ***.

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*** ***** ** ******* *** ******** about **&*'* ******** ***** ***** ****** 10% **** *** **** ******* ***** from ***** *** **** ** * reversal **** ***** ****** ***** **** days ***.

UPDATE: *** ****: ***** ****

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** *** ****** **** *** *** CD&R ****** **** ** ***** ********* with ******* ******** ******* ** *** CD&R $*** ******* ** **** *** Wesco ****, ***** ***** ** ****** in ******** ** *** ***** *** Anixter.

** **** ******* * ******** ****** analyzing *** *** ****** ** ****.

Comments (37)

I would just ask whoever takes Anixter over, please focus more on being a better distributor and less on being an integrator.

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As an Integrator, I would tell Anixter stop being my competitor if you want my business.

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please focus more on being a better distributor and less on being an integrator.

Oh boy...

For context: Anixter End User Sales Troubles, Anixter Touts Selling to End Users

In fairness, I have not heard of as many issues recently (i.e., 2018 / 2019). Anyone have examples to share?

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They have started making their rounds again. Their pitch wasn't to blatantly we will sell direct to your end user but watch out for their own internal partners. Say you have a regional person trying to get business and their is a local branch that already has that business. The regional person will do whatever to get the sales from the local branch, no matter the cost. These are words I heard directly.

After the meeting I was not ready to get back on board the Anixter wagon. It's only a matter of time.

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They got better in my area. We have a large customer that we placed Sony in. Purchasing released the BOM to distributors instead of integrators and Anixter responded that they couldn't quote. CSC didn't (saw that coming) and quoted. Following the rules brought Anixter about $500k in Sony sales.

That said, my old Anixter rep Greg would call me on his way out of town from visiting my end users but as John said that was a long time ago.

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I thought the whole goal of Northern Video/Tri-Ed was to outplace ADI? And now who shows up to ruin the party? ADI... hahahahahah

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From the article: "ADI / Resideo and Ingram Micro are almost certainly not the competitor here. Resideo has far bigger problems than trying to buy out Anixter."

So how is ADI ruining anything here?

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Ok fine

I will admit it ........

I am party A

Shhhhhhhh

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Lol, you are big enough to take over their ISC East booth, but not their company...

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Update: Also, Wesco is a possibility. They too are a publicly-traded competitor of Anixter, though with a smaller than Anixter market capitalization of ~$2.3 billion, which might make such a deal harder.

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Tech Data is to be acquired by Apollo Global Management. Perhaps they’ll wrap up Anixter as well?

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Jake, thanks! I missed the Tech Data / Apollo deal. They announced a final approval a few weeks ago that will take Tech Data private.

Also, StreetInsider says sources say Wesco is Party A.

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A repeat, in larger form, of the Brazos PE Partners simultaneous acquisition of Tri-Ed and Northern Video 10 years ago?

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6 months ago I once again found myself up against Anixter.

I was told by a good friend of mine who works at Anixter that an Anixter employee said in passing that they will "squash me".

That friends phone call was then followed by Anixter courting my client with lavish parties and handing out major sporting event tickets.

Anixter then sent a letter to each manufacturer I purchase from stating that moving forward they will be the exclusive reseller of products to this particular client and that they are not to sell to me any longer.

Fortunately for me almost all of the manufacturers flat out rejected Anixters letter, it seems as if I won this battle but the war will wage on.

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Any chance you can get a copy of that letter? Sounds anti-competitive…

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I have the letter, and yes it did have an anti competitive tone.

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Anixter Intl purchased by Clayton, Dublier & Rice

Anixter to be Privately Acquired for $3.8 Billion | Industrial Distribution">Anixter to be Privately Acquired for $3.8 Billion | Industrial Distribution

After reading the post about "back stabbing" I might just change suppliers.

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Anixter Intl purchased by Clayton, Dublier & Rice

To clarify, that news from last month assumed no higher bidders would emerge after the private equity firm made their move. However, as Anixter has now revealed, a higher bidder has emerged (Competitor Party 'A') so the deal with the private equity firm is in limbo.

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Its Anixter. It doesnt matter to me what going on, Im still certain they are up to no good.

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I'm surprised no one mentioned Graybar as a potential acquirer. $7.2B in revenue for 2018. They compete in some spaces (albeit, the less "techie" ones). It would probably be a complimentary fit.

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Graybar is not publicly traded but Anixter says the company trying to buy them is.

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Oddly, SSN just sent out a newsletter leading with CD&R acquiring Anixter:

It's a bit awkward, but not unsurprising, that they did not update / do a new report on this.

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Anixter's CEO sent an odd email to employees, implying that Party A's $90 offer is inferior to CD&R's $82.50:

During the go-shop period, we did receive interest from another party. While we cannot disclose the name of the interested party, we are engaged in continuing discussions with the interested party. We cannot guarantee that the discussions will result in a superior proposal. At this time, we still have a signed agreement in place with CD&R and are working to consummate the transaction under that agreement. As you may have seen, we previously announced that CD&R raised its purchase price by $1.50 per share to $82.50 per share. [Emphasis Added]

$90 > $82.50...

In fairness, price is not always the only consideration, but it is going to be risky to turn down more money. For the shareholders, it does not matter if Anixter management's future is better with CD&R, if the money is less.

Not a coincidence, a law firm has launched an investigation into Anixter's board agreeing to the CD&R deal:

Bragar Eagel & Squire is concerned that Anixter’s board of directors oversaw an unfair process and ultimately agreed to an inadequate deal price. Accordingly, the firm is investigating all relevant aspects of the deal and is committed to securing the best result possible for Anixter stockholders

Net/net, unless, CD&R matches or beats Party A's offer, Anixter may be sued.

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And the market is expecting the deal to be done in the $90 range, not $82.50, as the stock price movement shows:

Best case scenario for Anixter management, CD&R raises their bid.

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So it’s not Sonepar then?

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Surprised Amazon hasn't been circling around this opportunity. That would be a game changer for the industry's distribution segment. Sure, Amazon has their own distribution centers so why would they need Anixter's; however, moving giant roles of cabling to an industrial construction site is a lot different than shipping small boxes to someone's house, and Anixter has made recent reinvestments in this process.

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A deal with CD&R, the private equity firm is now likely, as Anixter has announced that CD&R has upped their offer price and included effectively a bonus to shareholders if CD&R sells Anixter to Wesco or acquires Wesco in the following year after the deal is closed.

In particular, Sam Zell is now backing the CD&R deal and a vote in February 2020 to close the deal.

Interestingly, the announcement also says that CD&R tried to turn the tables and buy out Wesco in combination with Anixter but that Wesco refused:

We have been advised by CD&R that it has made a fully financed proposal to WESCO to acquire all of the outstanding shares of WESCO and that the Board of Directors of WESCO has determined that the proposal does not form a basis for discussions at this time.

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Interesting, Wesco is not giving up. Now, Wesco has gone public confirming their offer but keeping it at $90 per share.

Given Anixter's press release the day before and Zell's support, it is not clear if Wesco can beat CD&R unless they up their bid for Anixter.

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Update: CD&R has now raised its offer to $93.50, matching Wesco's Dec 26th offer but bettering it in providing it all cash. Anixter has accepted it explaining:

the Board carefully considered the value and risk profile of WESCO’s offer comprising cash, WESCO common stock and a new series of WESCO preferred stock, for which there is no established market or trading price. The Board has unanimously concluded that CD&R’s improved all-cash proposal is superior to WESCO’s offer

The bidding is likely over and Wesco has lost. They could try to raise to $100, etc. but given Wesco's relative size and resources, they are unlikely to be able to support that.

But Wesco may still have won, in one sense. Their actions forced CD&R to increase the price paid by 14% (from $82 to $93.50 per share). This means will limit CD&R's returns on their investment and potentially the upside for Anixter's management in going private.

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This means will limit CD&R's returns on their investment and potentially the upside for Anixter's management in going private.

Maybe that was Wesco's strategy all along? There are likely cuts Zell and Anixter management made over the years in quiet prep for sale that CD&R may have to reinvest to grow the business. A good tactic to try and limit your competitor.

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UPDATE Jan 3rd: Wesco Ups Offers, Counters

Wesco is not giving up, increasing their offer from $93.50 to $97.00, making their pitch:

WESCO's revised proposal is the only proposal that offers Anixter stockholders the ability to participate in the benefits of the combination, synergies and resulting value creation.

That is true, simply because CD&R would take Anixter private, meaning that current public shareholders would not have any upside from Anixter's post-public future. On the other hand, Wesco poses downside risk as their offer is more complex with 35% of it based on issuing new common stock and perpetual preferred stock. As for the upside, Anixter shareholders could take the proceeds from the CD&R deal and invest it in any number of other publicly traded stocks.

If Anixter's previous approach holds, we do not think 3.7% is enough of a premium, given the risks of the Wesco bid.

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New Anixter financial disclosure for their upcoming February 4th meeting.

Interesting, it reveals CD&R offered to buy Wesco for a 23% premium:

the price proposed to WESCO was $68 per share, which represented an approximately 23% percent premium to the price of WESCO shares at the close of U.S. financial markets on December 6, 2019.

It also includes a lengthy step by step explanation of the negotiation process with Wesco.

In it, Anixter argues that Wesco's nominal price is actually worth 10% less in real value, as the excerpt below shows:

Worth noting, Wesco has since raised their price but Anixter's structural point remains, they argue that a marginally nominal higher bid from Wesco is inferior to CD&R's all-cash offer.

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Whoever takes it over, I have serious concerns for the fate of Inner Range and it's products which Anixter bought last year.

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I have serious concerns for the fate of Inner Range

What concerns do you have? Can you elaborate #12?

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Inner Range has a great range of products. Their development came because they were independent and reasonable maneuverable.

Many of us were concerned at Anixter's buyout as no one was sure what their plans were for IR. The CSD part of their acquisition was obvious but not so for IR. There have been enough rumours around that Anixter was aiming to push Integriti into North America.

It still left many with concerns that development wouldn't quite be the same. New owners, new culture etc etc.

But the ink hasn't even dried on this last takeover and now we're staring at potentially another direction change and back to the unknown, potentially they might not see the value of trying to introduce a new product and spin it right out to another buyer.

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Update: Reversing their previous position, Anixter has now publicly declared that Wesco's $100 mixed offer is a "Superior Company Proposal" over CD&R $97 all-cash one.

It is not over, though. "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.”

Not clear if Anixter was bluffing about CD&R's proposal being worth nearly 10% than the same nominal offer from Wesco but this is a reversal from their stated logic just days ago.

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UPDATE: Jan 13th: Wesco Wins

So despite Anixter earlier arguing that Wesco's bid was inferior to CD&R's by nearly 10%, today Anixter confirmed that they are taking Wesco's 3.1% nominal share price higher offer.

No one should feel bad for CD&R losing here as their agreement with Anixter requires Anixter to pay CD&R $100 million to take the Wesco deal, which Wesco is paying in addition to the price for Anixter.

We will release a separate report analyzing the now agreed to deal.

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