- Premier Farnell investors to get 165 pence a share in cash
- Offer worth $871 million represents a premium of about 51%
Daetwyler Holding AG agreed to buy the U.K. supplier of the Raspberry Pi mini-computer Premier Farnell Plc for 615 million pounds ($871 million) in a deal aimed at consolidating the fragmented European electronic-components distribution market.
Investors will get 165 pence in cash for each Premier Farnell share, about a 51 percent premium to Monday’s closing price, the company said in a statement Tuesday. They will also receive the proposed final dividend of 3.6 pence a share. Stock in the U.K. supplier of the credit-card sized computers that sell for as little as $5 surged as much as 50 percent, while Swiss industrial-parts provider Daetwyler fell as much as 6 percent.
"The acquisition is in line with Daetwyler’s strategy and strengthens significantly its position in high-service electronic components distribution,” said Fabian Haecki, an analyst at Vontobel. "This transaction comes however at a steep price. Still, we like the strategic rationale."
Daetwyler, whose customers include power-systems manufacturer ABB Ltd. and machinery maker OC Oerlikon Corp AG, has been on the hunt for acquisitions to bolster its businesses. Chief Executive Officer Paul Haelg has signaled he wanted to expand in the U.S., Asia and other European markets. Premier Farnell’s Raspberry Pi computers are programmable and were designed to help people get into coding.
The combination “represents a strong strategic fit and is highly attractive,” Premier Farnell said in the statement, adding that its directors unanimously back the offer. The transaction will bring together companies with complementary product ranges, distribution channels and geographies operating within a market worth as much as 40 billion Swiss francs ($42 billion), it said.
Alone, Premier Farnell faced further restructuring to improve efficiency and lower costs to contend with an increasingly competitive market, its chairman, Valerie Gooding, said in the statement. Combining with Daetwyler will help address the need for added scale, she said. A large part of the value of the expected synergies will be awarded to the Premier Farnell shareholders, Vontobel’s Haecki said in a note.
Premier Farnell shares traded 50 percent higher at 164 pence as of 2:10 p.m. in London. Daetwyler declined 1 percent to 138.40 Swiss francs after reaching a low of 132.20 francs. Electrocomponents Plc, an Oxford-based competitor, dropped 4.7 percent to 264.30 pence.
Daetwyler expects annual synergies of 50 million to 70 million francs by the end of 2019. The combined company’s total revenue will be about 2.5 billion francs with Daetwyler’s sealant division operating separately, according to the statement. It’s expected to be “accretive immediately” on an earnings per share basis even before effects from expected savings.
The offer implies an enterprise value for Premier Farnell of 792 million pounds. Daetwyler CEO Haelg said on a webcast the uncertainty around Britain’s membership of the European Union added to the attractiveness of the deal because of its impact on the pound. Daetwyler could live with a vote for the U.K. to leave or remain in the bloc, he said.
“When we looked at all the targets, this was clearly top of the list,” Haelg said. While this is the biggest deal Daetwyler has done, there are other possibilities in the pipeline, executives said on the call, without giving details.