Anixter International Inc., Skokie, Ill., said it will acquire the operations and assets of bankrupt Pentacon Inc. for about $121 million.
Anixter said it will buy Pentacon's operations as part of a bankruptcy reorganization plan filed by Pentacon, a provider of inventory management services.
Pentacon is a provider of advanced inventory management services for fasteners and small parts including procurement, just-in-time delivery, quality assurance testing, kitting, and e-commerce and electronic data interchange to a broad spectrum of industrial and aerospace customers. For the full-year 2001, Pentacon had revenues of $259.4 million. Its top customers include Boeing, Bombardier, Cummins, and Harley Davidson.
Pentacon said the deal includes “substantially all” of its assets and operations.
The purchase of the Pentacon operations and assets are conditioned upon a number of factors, including approval by the Bankruptcy Court and anti-trust clearance.
Pentacon will sell the operations to Anixter as part of a plan of reorganization filed in the U.S. Bankruptcy court for the Southern District of Texas.
Robert W. Grubbs, president and CEO of Anixter International, said, “Pentacon's business model, position as a value-added distributor and brand name, Fortune 500 customer base are perfect complements to our current integrated supply and specialty wire and cable OEM businesses. This acquisition allows us to broaden our product offering and presents the opportunity for enhanced organic growth of both Anixter and Pentacon, all while maintaining our focus on bringing increased value to our suppliers and customers. We also believe there are long-term cross selling opportunities as a result of this acquisition.
“The various operations that comprise Pentacon have each had long and successful operating track records. The operating performance, however, has been overshadowed by the high amount of leverage and high cost of capital that was incurred in building Pentacon. We believe that by removing the costs and uncertainty associated with the capital structure, the Pentacon operations will be able to grow and be a full participant in the emerging economic recovery,” continued Grubbs.
Grubbs concluded, “The proposed transaction is an excellent way for Anixter to use its distribution know-how to effectively deploy the significant amounts of free cash flow that has been generated over the past few quarters. We intend to pay for the acquisition through a combination of current cash balances and added working capital borrowings. The acquisition is expected to be accretive to earnings immediately upon completion of the transaction.”