Avnet Expands in the United Kingdom and Ireland with Horizon Buy
May 12, 2008 Timothy Prickett Morgan
Horizon Technology, through its various divisions, is a big player in the distribution of servers manufactured by IBM and Sun Microsystems. The company is public, and its stock trades on the Dublin and London stock exchanges. The company was founded in Ireland as a reseller of Sun Unix gear back in 1991, and in 1994, the company expanded its Sun reseller business into the much larger market of the United Kingdom. In the past several years, Horizon Technology has also acquired various software and implementation businesses to create a unit specifically dedicated to applications separate from hardware. This software business only operates in Ireland, and the U.K. business is focused exclusively on IT infrastructure and related services. Horizon Enterprise Systems is the unit that resells IBM’s Power and X64 server lines, storage arrays, and Tivoli systems management security software.
Under the acquisition offer that has been approved by the boards of director at both Avnet and Horizon Technology, Avnet is paying €1.18 in cash for each share of Horizon, which value’s the company at approximately €101.3 million. At the time that the proposed deal was announced by Horizon in the United Kingdom on March 13, this offer was 153.8 percent above the closing price prior to when the deal was announced, and 60.1 percent above the average daily closing price over the prior six months. By the time the deal was announced on April 21 by Avnet, the deal was announced as being worth €98.5 million, including €4.1 million in cash held by Horizon Technology on December 31.
For the year ended December 2007, Horizon Technology brought in €288.2 million (up 12 percent, and the lion’s share coming from the U.K.), so the offer seems fair based on revenues even if it seems pretty large compared to recent stock prices on the Dublin and London stock exchanges. But Horizon Technology was only able to grow profits by 6 percent, to €10.65 million, in 2007, and the profit pressure is one of the reasons (presumably) why the company’s stock was so low in recent months.
“The acquisition of Horizon will strengthen Avnet Technology Solutions’ position in the U.K. IT distribution market and expand its geographic coverage into Ireland,” explained Roy Vallee, chairman and chief executive officer of Avnet. “Horizon’s position with tier one vendors and growing services practice offers an opportunity to bolster Avnet’s current product and services offerings in Europe. This acquisition creates exciting cross selling opportunities and adds scale to our Avnet Technology Solutions business in the region. We are also excited about the management and talented team of people at Horizon that will allow Avnet to accelerate the growth of Avnet Technology Solutions in Europe.”
The deal is subject to approval by U.S., Irish, and European regulatory authorities, and is expected to close by the end of June.