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WESCO’s Increased Offer to Buy Anixter “Superior”

The bidding war for control of Anixter International has swung in the favor of WESCO International after the Pittsburgh-based distributor raised its bid to acquire Anixter to $100 per share.

As tedmag.com previously reported on January 2, 2020, Anixter’s board of directors agreed to be purchased by private equity firm Clayton, Dubilier and Rice for $93.50 a share in cash. However, that agreement did include the clause, “Anixter may, subject to the provisions of the Second Amended Merger Agreement, respond to an unsolicited proposal that is reasonably likely to result in a superior proposal. In addition, Anixter may continue to engage in discussions with WESCO International, Inc., which remains an Excluded Party” 

The following day, WESCO increased its offer to buy Anixter to $97 a share.

On January 9, 2020, the Anixter board of directors announced the new offer from WESCO, which includes both cash and stock options equal to $100 a share, is “superior” to the offer from CD&R. Anixter told CD&R about the superior offer, and, according to a news release, is giving CD&R five days to continue the bidding war and create an offer that will be better than the current WESCO bid.

Anixter’s January 9, 2020 Press Release

GLENVIEW, Ill. — Anixter International Inc. (“Anixter” or the “Company”) announced today that the Anixter Board of Directors (the “Anixter Board”) determined that an offer from WESCO International, Inc. (“WESCO”) constitutes a “Superior Company Proposal” as defined in Anixter’s previously announced definitive agreement and plan of merger with an affiliate of Clayton, Dubilier & Rice, LLC (“CD&R”).

Under the terms of WESCO’s revised offer, WESCO would acquire Anixter for nominal consideration of $100.00 per share, reflecting an enterprise value of approximately $4.5 billion including net debt. The proposed consideration consists of $70.00 per share in cash, 0.2397 shares of WESCO common stock, and $15.89 per share in face amount of WESCO perpetual preferred stock.

The cash portion of the merger consideration will be increased by up to $2.82 to the extent the value of the WESCO common stock consideration, calculated using a volume weighted average before closing, declines below $14.11 per share, providing Anixter stockholders with 20% down-side protection based on WESCO’s closing price on January 2, 2020. Anixter stockholders would receive the benefit of any increase in the value of the WESCO common stock consideration above $14.11 per share. Based on the closing price on January 8, 2020, the total consideration would be $100.16.

WESCO has told Anixter that the perpetual preferred stock is expected to be listed on the New York Stock Exchange, will be non-callable for five years and will pay dividends at a fixed rate subject to reset every five years. WESCO has also informed the Company that the proposed acquisition of Anixter will not require the approval of WESCO’s stockholders.

“After careful review and consideration and consultation with our financial and legal advisers, the Board of Anixter has determined that the current WESCO offer is superior to the existing CD&R agreement,” said Sam Zell, chairman of Anixter.

Anixter has notified CD&R of the Anixter Board’s determination and, pursuant to the CD&R Merger Agreement, CD&R has the option for the next five business days to negotiate an amendment of that agreement so that WESCO’s offer will no longer be a “Superior Company Proposal.”

Under the CD&R Merger Agreement, Anixter is required to pay a $100 million termination fee to CD&R if the Anixter Board terminates the CD&R Merger Agreement in order to enter into an agreement with WESCO. WESCO has agreed to pay the termination fee on Anixter’s behalf in such event.

At this time, Anixter remains subject to the CD&R Merger Agreement and the Anixter Board has not changed its recommendation in support of the CD&R transaction or the existing CD&R Merger Agreement, or its recommendation that Anixter’s stockholders adopt the CD&R Merger Agreement. There can be no assurances that a transaction with WESCO will result from WESCO’s offer, or that any other transaction will be consummated. There can be no assurance that CD&R will seek to negotiate with Anixter or will make a revised offer.