Premier to Be Acquired by British Firm
England’s Farnell Electronics on Tuesday said it has agreed to acquire Premier Industrial Corp. in a $2.8-billion cash-and-stock deal that would create the world’s third-largest electronics distributor.
The merged electronic components and equipment distribution business, to be named Premier Farnell, would have projected annual sales of $1.6 billion. Only Arrow Electronics Inc. of Melville, N.Y., and Avnet Inc. of Great Neck, N.Y., are larger.
The deal would enable Premier Industrial to achieve its goal of becoming a bigger player in the global market, said Morton L. Mandel, the company’s chairman.
“It’s a very gutsy move for both parties,” Mandel said. “Normally, our acquisitions have been very small, and so have theirs. But we see this is going to give us a multinational company, and it makes a lot of sense.”
Farnell, based in Leeds, England, employs 2,300 and had sales of $817 million in fiscal 1995. Cleveland-based Premier has 4,500 employees and had sales of $818 million in fiscal 1995.
Mandel said he does not expect any jobs to be cut at Premier and that the merger could lead to the creation of jobs.
“I don’t foresee a lot of slash and burn. It will probably be more of a streamlining of inventories,” said Duff & Phelps analyst Abishek Gami in Chicago, adding that it was difficult to see a downside to the deal.
Under the deal, Farnell would pay about $34--half in cash and half in common or preferred stock--for each share of Premier, which closed up $6.625 at $30.75 on the New York Stock Exchange on Tuesday.
Farnell Chairman Richard Hanwell, 52, would become chairman of Premier Farnell. Mandel would become deputy chairman and would be chairman of Premier Farnell Corp., the U.S. subsidiary that would handle the group’s North American businesses.
The merged company’s headquarters would be in Wetherby, West Yorkshire, England, with North American operations based in Cleveland.
Farnell expects to finance the deal in part by raising $823.5 million in a rights offering to its shareholders and obtaining a bank loan.
Premier’s board has unanimously backed the offer, and investors with 54% of Premier’s stock have agreed to vote in favor of the deal, the companies said in a statement.
It’s too early to tell how the combination might change Premier Industrial, said analyst Elliott Schlang of Hancock Institutional Equity Services in Cleveland.
“Judging from Farnell’s record, the two are compatible and each has what the other needs. Farnell offers a younger management group and a European exposure, while Premier offers a superb domestic complement,” Schlang said.
