Phoenix, AZ/Houston, TX - March 22, 2001 -- Avnet, Inc. (NYSE:AVT) and Kent Electronics Corporation (NYSE:KNT) announced that they have reached a definitive agreement for Avnet to acquire Kent in a stock-for-stock merger transaction valued today at approximately $550 million, including approximately $50 million of cash currently on the books of Kent in excess of debt assumed. Under the terms of the agreement, Kent shareholders will receive 0.87 of a share of Avnet for each share of Kent on a tax-free basis. The merger has been approved by the boards of directors of both companies and is subject to the approval of the shareholders of both companies as well as customary regulatory approvals. The transaction is expected to be accounted for as a pooling-of-interests and to be completed within the next 90 days.
Avnet, Inc. is one of the world's largest distributors of electronic components, computer products and imbedded systems from leading manufacturers. Kent, with sales of approximately $1 billion, is a recognized leader in the electronics distribution industry in North America. Kent has two operating groups, Kent Components which focuses on specialty distribution of interconnect, passive and electromechanical components and Kent Datacomm which is an enterprise solution network integrator.
Roy Vallee, Avnet's chairman and chief executive officer said, "We have long admired Kent's talented employees and their ability to profitably build its market share in the distribution of interconnect, passive and electromechanical (IP&E) components. By combining Kent's electronic components operation, which has annualized sales of over $500 million, with Avnet's Electronics Marketing (EM) group's domestic IP&E business, we will create the largest specialty components distributor of its kind in North America. This new $1.6 billion division will be highly-focused and able to provide IP&E products and value-added services to a broad North American customer base. Larry Olson, Kent's current president and chief executive officer will be president of this new division, reporting to Steve Church, co-president of Avnet EM. The division will be headquartered in Phoenix."
Mr. Vallee went on to note that Kent Datacomm, Kent's network integration equipment and services operation, will remain in Houston and become a new division within Avnet's Computer Marketing Group (CM). CM is comprised of divisions focused on specific suppliers, enterprise solutions and integrated services. "Following the Kent acquisition, Avnet Computer Marketing is expected to have annualized revenues in excess of $3 billion, of which more than 80% should be derived from sales of six strategic supplier partnerships: Compaq, EMC, Hewlett-Packard, IBM, Oracle and now as a result of the acquisition, Cisco. Mark Zerbe will continue as division president and report to Avnet Computer Marketing's president, Andy Bryant."
Mr. Vallee continued, "The Kent acquisition is part of Avnet's strategic plan to accelerate its earnings growth rate through increased product focus and specialization on a global basis. Upon the completion of this transaction and considering the recent organizational changes in Avnet's $4 billion European operations, Avnet expects that, beginning July 1, 2001, more than two-thirds of its annualized revenues could be derived from its specialized products and services divisions."
The transaction is expected to be slightly dilutive to earnings per share for the first one or two full quarters of combined operations and it is anticipated that the resulting synergies, operating leverage and financial benefits of the Kent acquisition will make it accretive thereafter. The Kent transaction strengthens Avnet's financial position by contributing strong earnings and operating cash flow which, coupled with Kent's strong balance sheet, will result in a favorable improvement in Avnet's debt to capital ratio and other credit statistics.
Morrie Abramson, Kent's chairman and co-founder said, "I believe that Avnet will be an excellent partner for Kent, supporting the growth that we have achieved to date and enabling us to increase customer penetration through Avnet's global organization, broad range of product offerings, and supply chain management capabilities. Equally important, we are confident that our corporate cultures are compatible."
Larry Olson, Kent's president and chief executive officer noted, "In merging with Avnet, we believe we are ensuring the continued growth of Kent's two core businesses as well as providing an exceptional platform to address the globalization of our industry. The cross-selling opportunities for both specialty components and network integration are substantial, and Kent's expertise fits perfectly with Avnet's specialization strategy."
Current Quarter Guidance
With their fiscal quarters close to completion, and within the context of the well-documented downturn in the electronics industry, Avnet and Kent are commenting on their outlooks for the periods ending March 30, 2001 and March 31, 2001, respectively.
Avnet expects revenues for its third fiscal quarter ending March 30, 2001 to approximate $3.2 billion, an increase of 19% from last year's third quarter, but a sequential decline of about 6% from second quarter fiscal 2001 levels. A sharp decline in demand for electronic components in North America and Asia and somewhat weaker computer product sales penalized sequential revenue growth.
Earnings per diluted share for the fiscal 2001 third quarter are now likely to be in the range of $0.60 to $0.65, compared with $0.56 in the fiscal 2000 third quarter, and $0.78 in the fiscal 2001 second quarter. Avnet will release its fiscal 2001 third quarter results on or about April 26, 2001 and will provide guidance with respect to the fiscal 2001 fourth quarter at that time.
Kent Electronics expects revenues for its fiscal 2001 fourth quarter ending March 31, 2001 to be within the range of $230 million to $240 million. This represents a 4% - 8% increase over the comparable year-ago quarter and is basically flat on a sequential basis. As anticipated, Kent's network integration business should post a double-digit sequential revenue increase over fiscal 2001 third quarter levels; however, company-wide fiscal fourth quarter revenues and earnings are expected to be penalized by reduced demand for specialty electronic components. Therefore, based on currently available information, Kent is likely to report fiscal 2001 fourth quarter earnings per diluted share of $0.30 to $0.33, comparable to the prior quarter, but below current First Call analyst consensus estimates of $0.35.
In summary, Mr. Vallee noted, "The Kent acquisition represents both important strategic and financial benefits for Avnet. We believe it will accelerate our ability to build a specialist IP&E business in North America, enter the high-growth network integration market, enable us to further leverage our infrastructure, and enhance our Company's financial flexibility."
About Kent Electronics
Houston, Texas-based Kent Electronics is among the largest publicly traded specialty electronics distributors and network integrators. Kent Components provides distribution and value-added services with a focus on interconnect, passive and electromechanical components. Kent Datacomm provides complete end-to-end networking solutions, including design, consulting, source selection, product configuration and installation, and warranty and technical support. Kent's Web site is located at http://www.kentelectronics.com/.
About Avnet
Phoenix, Arizona-based Avnet, Inc., a Fortune 500 company with annual sales exceeding $11.7 billion, is one of the world's largest distributors of semiconductors, interconnect, passive and electromechanical components, computer products and enterprise solutions and embedded systems from leading manufacturers. Serving customers in 63 countries, Avnet markets, inventories and adds value to these products and provides world-class supply-chain management and engineering services. Avnet's Web site is located at http://www.avnet.com/.
Forward-Looking Statements are omitted