By Kavita Sabharwal-Chomiuk
Wesco International, a provider of electrical, industrial and communications MRO and OEM products, construction materials, advanced supply chain management and logistics services, has submitted a revised proposal to the board of directors of Anixter International to acquire the company for $97.00 per share in cash and stock. This revised proposal materially improves upon Wesco’s December 26, 2019 proposal, while retaining all of the prior proposal’s attractive features. Specifically, the proposed transaction with Wesco:
- Affords Anixter stockholders consideration per Anixter share of $63.00 cash, plus a fixed exchange ratio of 0.2397 shares of Wesco common stock, as in Wesco’s prior proposal, plus $19.89 of a newly created class of Wesco perpetual preferred stock.
- Anixter stockholders would participate in all the value upside in the Wesco common stock. The common stock consideration would be subject to downside protection, such that if the average market value of Wesco common stock prior to closing is between $47.10 per share and $58.88 per share, then the cash consideration paid at closing would be increased by up to $2.82 per share to ensure that the total consideration remains at $97.00 per Anixter share.
- The perpetual preferred stock is expected to have a fixed market rate of approximately 9.25% (representing a spread of 325 bps over the prevailing unsecured notes to be issued to affect the transaction), subject to reset and a five-year non-call feature, and will be listed on the New York Stock Exchange and is expected to get equity treatment from the rating agencies. The terms of this newly issued preferred stock have been fully negotiated with Anixter and its advisors over several weeks.
- Based on the closing price of Wesco’s common stock on January 2, 2020, the total consideration represents $97.00 per share.
“The scale, earnings power and significant free cash flow of the combined business would accelerate growth and deliver increased shareholder value,” according to Wesco. The upfront consideration and Anixter stockholders’ share of the capitalized synergies represent a value opportunity significantly greater than $100/share for Anixter’s stockholders. Wesco’s revised proposal is the only proposal that offers Anixter shareholders the ability to participate in the benefits of the combination, synergies and resulting value creation, according to Wesco.
“Wesco is uniquely positioned to deliver immediate value to Anixter stockholders and provide the ability to participate in the significant upside potential of a combined organization,” said John J. Engel, Wesco’s chairman, president and CEO. “Together, we would create a premier electrical and data communications distribution company, with an enhanced strategic profile and competitiveness, generating significant expected synergies and earnings accretion. We continue to strongly believe this transformative combination is in the best interests of both companies’ stockholders and that our latest proposal represents a Superior Company Proposal compared to Anixter’s current agreement with CD&R.”
In October 2019, Clayton, Dubilier & Rice, LLC (CD&R) announced plans to acquire Anixter, and on Jan. 2, 2020, Anixter agreed to an amendment and restatement of its merger agreement with CD&R to increase the per-share consideration payable to Anixter’s shareholders to $93.50 per share in cash (from $86 per share in cash and a $2.50 contingent value right upon the occurrence of certain events). Anixter says the current merger agreement with CD&R does not include the contingent value right.
In accordance with the merger agreement with CD&R, and in consultation with its financial and legal advisors, Anixter says its board will carefully review and consider Wesco’s latest proposal and whether it constitutes a “Superior Company Proposal,” as defined in Anixter’s merger agreement with CD&R. The company does not expect to comment further on the proposal until it has completed its review and consideration. However, Anixter remains subject to, and its Board has not changed its recommendation in support of, the current merger agreement with CD&R.