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WESCO Completes Anixter Buyout, Expands in North America

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WESCO International, Inc. (WCC - Free Report) has acquired Anixter International in a transaction valued at $4.5 billion.

Anixter — a supplier of network and security, electrical and electronic plus utility power solutions — is best known for communication and security products.

Upon completion of the deal, Anixter is now a wholly-owned subsidiary of WESCO. Reportedly, the consolidated company will now be the largest distributor of electrical and data communication products in North America.

Benefits

The deal has immense growth opportunities for WESCO. Strategically, this deal is a perfect fit for both the companies as it makes the combined entity a leading electrical distributor in North America. The buyout expands the acquirer’s product portfolio in industrial, construction and utility areas.

These apart, the acquisition provides WESCO with additional expertise in industrial, construction, utility and new cross-selling opportunities.

The deal is also accretive to WESCO’s financials. Pro-forma revenues of the combined company were $17 billion in 2019. The deal has resulted in increased scale, which enables the combined company to accelerate digitization strategies and expand in international markets.

In addition, the deal will be immediately accretive to WESCO’s earnings in the first full year of ownership. Further, it will expand the company’s margin and EPS growth, as well as generate strong free cash in the future.

Notably, WESCO plans to use the cash flows and synergies of the combined company to reduce its leverage.

The deal will likely aid synergies for WESCO in the electronics industry, which is riding on growing proliferation of electric components and electrical equipment in every major sector across the world. It expects to realize annualized run-rate cost synergies of more than $200 million by the end of the third year of ownership.

Hence, Anixter’s comprehensive product portfolio will contribute significantly to WESCO’s top-line growth in the long run.

These positives will help WESCO gain investor confidence.

WESCO International, Inc. Price and Consensus

 

Bottom Line

Acquisitions that are a strategic fit for the company have been playing an instrumental role in shaping up WESCO’s growth trajectory over the past few years.

Notably, the company’s M&A activity helped it in fortifying the product and services portfolio. Further, these tactical actions bolstered its customer reach.

The latest deal is likely to expand key offerings and further add capabilities to its portfolio strength.

Zacks Rank & Stocks to Consider

Currently, WESCO carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Wayfair Inc. (W - Free Report) , eBay (EBAY - Free Report) and Inphi Corporation (IPHI - Free Report) . While Wayfair and eBay sport a Zacks Rank #1 (Strong Buy), Inphi carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Wayfair, eBay, and Inphi is currently projected at 23%, 12.4% and 37.7%, respectively.

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