Doing a distribution deal

Arrow Electronics is to acquire all of the assets of Pioneer-Standard’s Industrial Electronics Division for around $285 million.

Arrow Electronics is to acquire all of the assets of Pioneer-Standard’s Industrial Electronics Division (IED) for a purchase price of approximately $285 million in cash.

Arrow will use a portion of its cash and short-term investments on hand (approximately $650 million at year-end) to fund the purchase price and will not incur additional borrowings.

Pioneer-Standard will remain a public company, focused on its computer systems business and headquartered in Cleveland, OH. Sales of the portion of the IED business being acquired by Arrow (which does not include the high volume CPU business) are estimated to be approximately $700 million per annum. As such, IED is one of the largest distributors of electronic components to industrial customers in North America.

The IED business will be integrated into Arrow’s North American Components businesses, and the combination is expected to generate cost savings and other synergies of at least $60 million per year. As a result, the acquisition is expected to be accretive to earnings for Arrow. It is currently estimated that the transaction will add approximately $.20 per share to Arrow’s earnings in the first full year following the integration.

The transaction is subject to customary closing conditions, including obtaining necessary government approvals, and is expected to be completed within the next several months.