WESCO International Inc., a provider of business-to-business distribution, logistics services and supply chain solutions, has completed its merger with Anixter International Inc., creating a global B2B distribution and supply chain solutions company.
John Engel, chairman, president and chief executive officer, said, "Today marks a significant milestone for WESCO and Anixter. In combining two industry leaders with successful track records, we are creating the premier electrical, communications and utility distribution and supply chain solutions company in the world. This is a transformational combination that provides substantial value creation for our customers, supplier partners, employees, investors and the communities in which we operate. WESCO's capabilities in industrial, construction and utility matched with Anixter's expertise in communications, security and wire and cable create an industry leading line-up for our customers. As we bring together our complementary products, services and technologies, there are significant cross-selling opportunities that enable us to offer more solutions, to more customers, in more locations around the world. This is a growth play which will capitalize on the accelerating secular trends of electrification, increased bandwidth demand driven by higher voice, data, video and mobile usage, and the combination and digitization of our B2B value chain.
"I would like to welcome all WESCO and Anixter team members to our new combined company and thank them for their outstanding dedication and service. We have been executing a detailed, rigorous and process-oriented integration planning effort over the past few months. The high degree of collaboration among and across the integration teams has been inspiring and underscores the strong cultural alignment between WESCO and Anixter. We are taking advantage of the opportunity to leverage the best talent and ideas of two successful organizations in forming our new, world class enterprise. Our recently announced senior management team is excited and confident we will deliver our committed synergies, above-market growth and industry leading margins and returns. I look forward to reporting on our progress and the success of this transformational combination in the months ahead."
The company listed the following as its strategic and financial rationale at the closing of the merger:
- It enhances scale and global position: The combined company generated pro forma 2019 revenue of more than $17 billion. The increased scale enables the combined company to accelerate digitization strategies and provides a platform for growth in attractive international markets.
- It broadens and diversifies the product and services portfolio: The combined company has a comprehensive and balanced portfolio that unites WESCO's capabilities in industrial, construction and utility with Anixter's expertise in data communications, security and wire and cable. Bringing together the companies' complementary products, services, technologies and solutions creates cross-selling opportunities, strengthening the customer value proposition as well as supplier relationships.
- It delivers substantial synergies: WESCO expects to realize annualized run-rate cost synergies of over $200 million by the end of year three through efficiencies in corporate and regional overhead, optimization of the branch and distribution center network and productivity in field operations and the supply chain. In addition, WESCO expects incremental sales growth opportunities to result by cross-selling the companies' complementary product and services offerings to an expanded customer base and capitalizing on the enhanced capabilities across both networks.
- It provides immediate earnings accretion and significant free cash flow generation: The combination is expected to be accretive to WESCO's earnings in the first full year of ownership and, with the realization of synergies, substantially accretive thereafter. WESCO also expects the transaction to generate significant margin expansion and EPS growth. The combined company offers strong free cash flow generation, supporting continued investments in the business and enabling a return of capital to stockholders in the future.
- The ability to rapidly de-lever: WESCO will utilize the strength of the combined company's cash flows, including significant synergies, to reduce its leverage quickly and expects to be within its long-term target leverage range of 2.0x to 3.5x within 36 months.