Synnex Canada has announced plans to purchase longtime Canadian distributor Supercom Canada in a distribution merger worth $36.5 million.
In a statement announcing the deal, Synnex says that Supercom “enriches Synnex Canada’s existing product and service offerings, thereby enhancing its ability to serve customers throughout Canada.”
Over the last two-plus decades, Supercom has made a name for itself as a specialty and niche distributor, particularly strong with system builders and other smaller local solution providers. In a statement announcing the deal, Synnex CEO Kevin Murai praised the company, and founder and CEO Frank Luk in particular, for building “an enviable reputation in the Canadian IT market.”
In the same statement, Synnex Canada Mitchell Martin said that Synnex Canada “looks forward to better serving its enhanced base of customers and vendor partners.”
“I look forward to partnering with Frank to make Synnex the largest distributor in Canada,” Martin adds in the release.
The all-cash deal for Supercom includes $4.5 million in deferred payments to be made within 18 months, “subject to certain post-closing conditions,” and will see Synnex Canada assume just over $30 million in working capital debt, the company says. Synnex expects the deal to be “immediately accretive” to its overall earnings. Supercom, which has more than 250 employees in Canada, generated $440 million in its most recent fiscal year ending June 30, 2012.
Acquiring a venerable made-in-Canada distribution success story is hardly new territory for Synnex, which of course in 2004 purchased Guelph, Ont.-based EMJ Data Systems, founded by the inimitable Jim Estill. That move was very possibly ahead of its time by five years or so, introducing a value-added component to a broadline distributor, a balance that each of the “big three” disties has sought to enhance over recent years.
And like it did with EMJ – where founder Estill stayed on with Synnex for five years as CEO of Synnex Canada – Supercom’s legendary founder is staying in the fold. The company announced that Luk will join Synnex as senior vice president of partner advocacy, and will report directly to CEO Murai.
Rick Reid, president of distributor rival Tech Data Canada, said he was “surprised, but not shocked” by the deal, and that it was “an overdue change” for a market which has frequently called “over-distributed.”
“There’s just not enough business in Canada to be split amongst five or sometimes six distributors,” Reid said.
Although Reid stressed there had been no recent discussions, he said that making a bid on Supercom was something that Tech Data Canada had “considered over the years,” but ultimately decided against making the move because of the disparate focuses of their businesses. However, for as different as the focuses of Tech Data and Supercom are, the focuses of Synnex and Supercom are very similar.
“It will make Synnex a bigger, stronger distributor,” Reid said. “I applaud them for making the move.”
Reid had high praise for Luk, as “an incredible competitor, and a huge part of the Canadian distribution landscape for a long time,” and said that selling the business to Synnex was “a great exit strategy.”
In a statement announcing the deal, Synnex Canada said it believes that the deal for Supercom, which is still pending regulatory approval, will close in April.