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Wesco Inks USD 4.5bn Deal for Anixter International
Tuesday 14 January 2020

14 January 2020 - US-based network and security products, electrical and electronic solutions and utility power solutions distributor Anixter International Inc. (NYSE: AXE) has signed definitive merger agreement under which US-based Wesco International, Inc. (NYSE: WCC) will acquire Anixter in a transaction valued at approximately USD 4.5bn, the companies said.

Anixter's board deemed the latest offer from Wesco as superior to the company's existing buyout deal with investment firm Clayton, Dubilier and Rice.

This is the latest move in a bidding war. In late November, an affiliate of investment firm Clayton, Dubilier and Rice upped the consideration to be paid for Anixter International to USD 82.5/share from the USD 81.00 per share in cash originally agreed in October 2019.

On 9 December 2019, Wesco emerged as a second bidder.

With the latest move, Anixter's prior agreement to be acquired by Clayton, Dubilier and Rice, LLC has been terminated, following CD and R's waiver of its matching rights under the agreement.

Under the terms of the agreement, each share of Anixter common stock will be converted into the right to receive USD 70.00 in cash (subject to increase as described below), 0.2397 shares of Wesco common stock and preferred stock consideration valued at USD 15.89, based on the value of its liquidation preference.

Based on the closing price of Wesco's common stock on January 10, 2020 and the liquidation preference of the Wesco preferred stock consideration, the total consideration represents approximately USD 100 per Anixter share, giving effect to the downside protection described below.

Based on transaction structure and the number of shares of WESCO and Anixter common stock currently outstanding, it is anticipated that Wesco stockholders will own 84%, and Anixter stockholders 16%, of the combined company.

Under the terms of the agreement, each share of Anixter common stock will be converted into the right to receive USD 70.00 in cash, 0.2397 shares of Wesco common stock, and preferred stock consideration consisting of 0.6356 depositary shares, each whole share representing a fractional interest in a newly created series of Wesco perpetual preferred stock.

The common stock consideration is subject to downside protection, such that if the average market value of Wesco common stock prior to closing is between USD 47.10 per share and USD Wesco 58.88 per share, then the cash consideration paid at closing will be increased commensurately by up to USD Wesco 2.82 per share, such that the reduction in value of the Wesco common stock is offset by an increase in the cash consideration within that range.

USD Wesco 2.82 per share will also be paid if the value of Wesco stock is below USD 47.10.

The preferred stock consideration consists of 0.6356 depositary shares, with each whole depositary share representing a 1/1,000th interest in a share of Wesco series A cumulative perpetual preferred stock, with a liquidation preference of USD 25,000 per preferred share and a fixed dividend rate calculated based on a spread of 325 basis points over the prevailing unsecured notes to be issued to effect the transaction (the dividend rate of the series A preferred stock is expected to be approximately 9.25%).

The fixed dividend rate will be subject to reset and the series A preferred stock will have a five year non-call feature.

Wesco has agreed to list the depositary shares representing the newly created series of preferred stock on the New York Stock Exchange, and the security is expected to receive equity treatment from the rating agencies.

The 0.6356 depositary share to be issued in the merger per share of Anixter common stock is valued at USD 15.89 based on the liquidation preference of the underlying interest in the series A preferred stock represented thereby.

Under the terms of the merger agreement, Wesco may elect to substitute additional cash consideration to reduce the amount of the preferred stock consideration on a dollar-for-dollar basis based on the value of the liquidation preference of the preferred stock consideration.

Wesco has obtained fully committed debt financing from Barclays and intends to offer a combination of debt, equity, and equity-content securities between signing and closing to fund the required cash consideration of the transaction.

At closing, WESCO estimates that its pro forma leverage on a net debt to EBITDA basis will be approximately 4.5x.

The transaction is subject to Anixter stockholder approval, receipt of regulatory approval in the United States, Canada, and certain other foreign jurisdictions, as well as other customary closing conditions.

Wesco and Anixter currently anticipate completing the transaction during 2Q20 or 3Q20.

Entities associated with Sam Zell, chairman of the Anixter board, which own approximately 10.8% of the outstanding shares of Anixter common stock, have entered into a voting agreement with WESCO, pursuant to which they have agreed, among other things, to vote their shares of Anixter common stock in favor of the merger.

Wesco International, headquartered in Pittsburgh, Pennsylvania, is a provider of electrical, industrial, and communications maintenance, repair and operating and original equipment manufacturer products, construction materials, and advanced supply chain management and logistic services.

Anixter International is a global distributor of Network and Security Solutions, Electrical and Electronic Solutions and Utility Power Solutions.

Barclays is serving as financial advisor to Wesco, and Wachtell, Lipton, Rosen and Katz is serving as legal advisor.

Centerview Partners LLC is serving as lead financial advisor and Wells Fargo Securities, LLC is also serving as financial advisor to Anixter. Sidley Austin LLP is serving as legal advisor.
Date Published: 14/01/2020
Target: Anixter International
Country: USA
Deal Size: 4.5bn (USD)
Sector: Utilities
Type: LBO
Financing: Cash and Stock
Status: Agreed
Buyer: Wesco International
Buyer Advisor: Barclays , Wachtell, Lipton, Rosen and Katz
Wesco swoops in and snatches deal from Clayton, Dubilier and Rice