WESCO Discusses Plans After Anixter Merger

“We’ve made substantial progress over the past several weeks,” WESCO President, Chairman and CEO John Engel told reporters as he discussed the upcoming merger with Anixter during a conference call on March 3, 2020. Engel said Anixter’s stockholder meeting on the merger is scheduled for April 9th, and everything is still on schedule to complete the transaction during the second or third quarter of this year.

Engel and Senior Vice-President and Chief Financial Officer Dave Schulz explained to reporters the current status of the merger, but also talked about how the combined company will operate in the future. At closing, the two will have a combined revenue of more than $17 billion, making them the largest electrical distributor in North America. Engel also pointed out that when the deal is done, they will have nearly 19,000 employees, and he expects they will generate $600 million in free cash flow, which Engel says will allow the company to continue to invest in itself. As of today, both companies are moving forward on the integration plan, and while all of the final details have not yet been worked out, Engel expects the synergies will result in about $200 million in cost savings over the next three years.

Schulz told reporters about 20% of those savings will come from supply chain efficiencies, and 45% will be in corporate overhead and administrative costs. Schulz did point out that about two-thirds of WESCO and Anixter locations are within 20 miles of each other, and after the merger, the company will create a coordinated supply chain that will include “line card reviews and harmonizing rebate programs”. Other cost synergies will include operating expenses from duplicate management functions and company costs like listing and agency fees and insurance. Schulz described the situation as “a significant opportunity to accelerate growth”, adding, “Our top focus is executing flawlessly on day one, deliver value, and build a world-class company.”

When asked about concerns related to a dip in the economy, Engel pointed out that both WESCO and Anixter are well-established companies that have been through downturns in the economy. “Both companies have been well established and we have both experiences a series of economic cycles,” Engel said. “Given the fundamentally strong cash flows, we think that underpins the strength of a wide array of economic scenarios. Both companies know how to operate through the cycle. As we bring these together, we provide a powerful combination.” Engel also pointed out that in the unlikely event of a strong economic downturn, this merger makes even more sense.

Engel said his team has been through a number of discussions with both customers and supply chain patterns as the merger moves forward. “The customer discussions we have had have been wide ranging. Across the board with the customer discussions I have been very pleased. In terms of our top supplier partners, I have spoken to virtually all of them. I would say that across the board, very strong support for the power of this combination,” Engel reported.

Schulz and Engel were asked about the coronavirus and if it is having any impact on business and the merger, and Schulz told reporters there is no impact right now. “We’ve been closely monitoring the situation. We have not had any issues servicing our customers and fulfilling orders. We feel we are in a good position right now, but it is something we continue to monitor.”