LONDON The boards of Avnet, Inc. and Abacus Group plc have reached agreement on the terms of a recommended cash offer to be made by Avnet or one of its subsidiaries for the entire issued and to be issued share capital of Abacus.
Several weeks ago component distributor Abacus (Newbury, England) said it was considering a number of approaches for the company as it warned of challenging market conditions and lower full-year sales.
Avnet are offering Abacus shareholders 55 pence (about $0.94) in cash for each Abacus Share valuing the entire issued and to be issued share capital of Abacus at approximately £42.2 million (about $71.6 million). The offer represents a premium of approximately 115.7 per cent. to the closing price of 25.5 pence per Abacus share on 9 October 2008 and 139.1 per cent. to the closing price of 23 pence per Abacus share on Sept 17 2008, being the day before Abacus' announcement that it was in talks regarding a potential offer.
Founded in 1972, Abacus is one of the leading distributors of electronic components in Europe operating through a network of 39 local offices and five warehouses across 10 European countries and an Asian office and warehouse in Hong Kong.
The business has developed both through organic growth in its core business of component distribution and through acquisition, which has resulted in an extended geographic presence and more diversified product range. Business activities are broadly split between three operating areas, which are composed of 21 separate trading operations.
“The acquisition of Abacus represents an excellent addition to Avnet's Electronics Marketing group in Europe,” said Roy Vallee, chairman and chief executive officer of Avnet. “Avnet's financial strength and focus on value-based management affords it the opportunity to acquire companies like Abacus despite current market conditions.”
Anthony Westropp, chairman of Abacus, added, “The Abacus Directors believe that Abacus' share price has failed for some time to reflect the underlying value of the business. This, coupled with the high level of borrowings, has also frustrated Abacus from pursuing its preferred strategy of expansion through acquisition and acting as consolidator in the sector. Not only does the Avnet offer represent a healthy premium for shareholders, during a period of challenging trading conditions, but there is also a strong strategic business rationale for the acquisition.”
In its latestfinancial figures Abacus Group saw turnover down 6.4 percent to £139.1 million (about $275 million) in the six months ended March 31, 2008. Gross profit is down 7.8 percent to £34.3million (about $67.9 million) which the company says reflects trading conditions and impact of the stronger euro on U.K. cost of sales
Profit before tax (after exceptionals and amortization) is £5.8million (about $11.5 million) compared with £5.9million (about $11.7 million) in the same period 12 months ago.