Apollo Global Acquired Tech Data For $5.4bln.

Apollo Global Acquired Tech Data For $5.4bln.
December 2, 2019


Private-equity firm Apollo Global Management Inc (NYSE: APO) is buying IT products and services provider Tech Data Corp (Nasdaq: TECD) in a deal valued at $5.14 billion, excluding debt. Including debt, the transaction is valued at about $6 billion. This represents a payment of $145 per share of Tech Data. Following the successful completion of the acquisition deal, Tech Data will get delisted and turned into a privately held company. The shares of Tech Data closed at $144.89, up $15.80 or 12.24% from the prior close. The shares of Apollo Global ended almost flat at $43.80.

Clearwater, Florida-based Tech Data provides small firms with tech software and hardware developed by large tech enterprises. In 2018, the company reported revenues of $37 billion. Roughly 16% of the company’s sales are generated from Apple products, while Cisco and HPE (Hewlett Packard Enterprise) products generate about 11% each.

Earlier, Apollo offered $130 a share, or a little more than $4.77 billion for the acquisition of Tech Data. However, billionaire investor Warren Buffett’s Berkshire Hathaway issued a counter bid, raising eyebrows of seasoned investors. Buffett is well known for avoiding deals with huge premiums. However, when executives at Bank of America highlighted the go-shop clause in Apollo’s agreement with Tech Data, Buffett quickly entered the fray. In this regard, Bank of America spoke with Todd Combs, an investment manager at Berkshire Hathaway, on November 19th. On November 20th, Buffett announced a counter bid of $140 a share, or a little more than $5 billion, excluding debt, for acquisition of Tech Data.

Two days later, Greg Abel, Vice Chairman of Berkshire, visited the headquarters of Tech Data to finalize the deal. On November 24th, Tech Data Board accepted Berkshire’s offer. But on November 27th, Apollo sweetened its bid to $145 per share, and Buffett pulled out of the bidding war. Apollo’s latest bid was accepted by Tech Data almost immediately. Buffett cleared the air by saying that he has no intention to make a better offer.

Following the completion of the acquisition, Rich Hume will continue to head Tech Data as CEO and the company’s head-quarter will remain unchanged. More importantly, Tech Data’s common shares will get delisted from Nasdaq. Hume opined that the acquisition offers an opportunity for Tech Data to use the money to increase its product offerings and also make them stand out from competitors.

Hume elaborated on the benefits of getting acquired by Apollo: “This investment by funds managed by one of the world’s leading global alternative investment managers will afford us additional resources to accelerate our ability to bring to market the technology products and solutions the world needs to connect, grow and advance. The transaction will enable us to build on our success, making Tech Data a growth platform and enabling us to further differentiate and expand our end-to-end solutions and provide our channel partners with unparalleled reach, efficiency, and expertise.”

Tech Data’s board has unanimously voted in favor of the deal, which is anticipated to close in the first half of 2020, subject to regulatory approvals and standard closing conditions. The deal is backed with funding by Wells Fargo, Barclays, Citi, JP Morgan, and RBC Capital Markets. Bank of America Securities acts as financial advisor to Tech Data, while legal advice is provided by Cleary Gottlieb Steen & Hamilton LLP. Furthermore, Citi is acting as lead financial advisor to Apollo.

Charles Adair, a lead independent director of the Tech Data Board of Directors, opined that the deal offers considerable value to shareholders. Adair said “This agreement follows a process of consideration of Apollo’s proposal by the Board that included review and discussion of strategic alternatives with the Board’s financial and legal advisors. The transaction delivers significant cash value to our shareholders and creates exciting opportunities for our colleagues, channel partners and other key constituents.”

Notably, the agreement with Apollo includes a go-shop clause that permits Tech Data to accept another higher bid from a potential buyer. The acquisition news is expected to keep Tech Data bullish in the week ahead.

The historical price chart indicates that the stock of Tech Data has broken the ascending triangle formation. Additionally, the stock is trading above its 50-day moving average, while the Chaikin money flow indicator is rising. Therefore, the stock is expected to remain bullish in the near-term.

tec - technical analysis - 2nd Dec 2019

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Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world

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