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Bidding War: WESCO Increases Offer to Buy Anixter International

One day after tEDmag.com reported Anixter International announced it was choosing a private equity firm’s $93.50 a share bid to take over the company, WESCO International has announced that it has increased its bid to what amounts to $97 a share. As of Friday morning, January 3, Anixter International has not responded to the latest WESCO bid.

The $93.50 bid from Clayton, Dubilier & Rice is an all-cash offer, which puts the value of the transaction at $4.3 billion. WESCO’s offer to buy Anixter includes $63 a share, plus a variety of common and preferred stock options to bring the total package to $97 a share. In its January 2, 2020 announcement that it was going to accept the bid from CD&R, Anixter International did say “Anixter may continue to engage in discussions with WESCO International, Inc.”.

WESCO International’s $97/Share Press Release:

PITTSBURGH, Jan. 3, 2020 — WESCO International, Inc. (“WESCO”) today submitted a revised proposal to the board of directors of Anixter International to acquire Anixter 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 effect 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. The upfront consideration and Anixter stockholders’ share of the capitalized synergies represent a value opportunity significantly greater than $100 per share for Anixter stockholders. 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.

John J. Engel, WESCO’s Chairman, President and Chief Executive Officer, commented, “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. 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.”

Financing

The transaction is not subject to a financing condition. WESCO has obtained fully committed debt financing from Barclays for the cash portion of the transaction. WESCO intends to fund the required cash consideration with a combination of long‐term debt financing and additional equity or equity‐content securities.

Approvals and Timing to Close

The proposed transaction is subject to Anixter’s board of directors, in consultation with its legal and financial advisors, determining that the WESCO proposal constitutes a “Superior Company Proposal” as defined in Anixter’s merger agreement with CD&R. Anixter would then terminate the merger agreement with CD&R concurrently with the execution of the definitive agreement with WESCO, following expiration of CD&R’s matching rights.

The WESCO transaction is subject to Anixter’s stockholder approval, receipt of regulatory approval in the U.S. and certain foreign jurisdictions, as well as other customary closing conditions. WESCO anticipates the transaction could be completed in the summer of 2020.