Tim Mueller’s Transaction Analysis: New IT M&A Deals March 29

Systemax Closes Sale of Certain European Technology Products Group Units to Hilco

Financial Information

Enterprise Value: Not Disclosed

Transaction Facts

  • Systemax (NYSE: SYX) announced today that it had, on Friday, closed the sale of its European Technology Products Group units, excluding those in France, to Hilco Capital Limited. The businesses were sold on a cash-free, debt-free basis.
  • The transaction would allow Systemax to concentrate on its two main profitable businesses: its North American maintenance, repair and operation (“MRO”) business, the Industrial Products Group; and its France technology VAR business. Together the two businesses generated revenues of $1.1 billion and an operating income of more than $38 million in 2016.
  • Primarily operating in the UK, Hilco Capital is a private equity firm that specializes in restructuring and refinancing other companies. It reached an agreement to acquire the UK division of Staples (NASDAQ:SPLS) in November 2016.
  • Systemax shares were up 37 percent today.

Focusing on Profitable Divisions to Drive Growth

  • New CEO, Clear Vision: This deal is the latest development in CEO Larry Reinhold’s strategy of maximizing profitability by focusing on the company’s most valuable and growing assets.
  • Cutting Ties at the Right Time: Systemax has employed similar exit strategies before. In December 2015, Systemax sold certain B2B assets of its North American Technology Group, including the TigerDirect brand, to PCM, Inc. (NASDAQ: PCMI) (martinwolf advised Systemax in the transaction). In August 2016, the company sold its German Operations to Cancom SE, citing a challenging market.
  • Transitioning into a Streamlined Brand: While Systemax is retaining a small residual equity position in the units, the transaction would allow for an immediate transition. The company has stated its desire to position itself into a well-managed corporate structure with the goal of maximizing revenue growth and delivering stronger performance.
  • Services in the Spotlight: Systemax operates as a direct marketer of brand name and private label products, organized under its Technology Products and Industrial Products segments. As a result, it faces competition from both large diversified MRO distributors such as Grainger Inc., MSC Industrial Direct Inc., and Fastenal Inc. and e-commerce giants like Amazon.

For more information about this transaction, click here to read the press release.

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