Distribution Watch: Avnet’s Summer of Controversy Continues with Offer for U.K. Distributor Premier Farnell

I know it seems like we’ve been paying a disproportionate amount of attention to Avnet Inc.’s (AVT) comings and goings, but it’s like As the Distribution World Turns over there these days. A month or so after Avnet’s board sacked its longtime CEO Rick Hamada, it’s made one of the biggest acquisition offers in its history.

British distributor and maker of the Raspberry Pi minicomputer Premier Farnell caught the attention of the Swiss company Dätwyler Group AG earlier this year, but that offer was topped last week by a $909 million bid by Avnet.

We’ve heard much caterwauling about the possible negative effects Brexit has had on the U.S. tech market, but maybe Avnet is wiser than we are when it comes to global markets (this should be shocking to no one). Its offer was about $67 million more than Dätwyler’s, but it came after the U.K. voted to hightail it away from the E.U. While it might seem counterintuitive, the British pound has lost more than 11 percent against the dollar since Brexit.

It seems like a win for Avnet, and the first feather in the cap of a post-Hamada era. But like any long-term relationship worth its salt, a Premier Farnell acquisition comes with baggage. Last September, the company sold its North American unit and cut dividends while it struggled with declining revenues in the post-digital transformation market. It’s undergone reorganizations, turnover in leadership and shrinking profit margins in recent years, like most distributors.

Salivating for the highest bidder, Premier Farnell’s board has declared its support for the Avnet bid. The company’s shares have more than doubled from its 52-week-low.

“In evaluating the Avnet Offer, the Board of Premier Farnell has considered various aspects of the Avnet Offer including valuation, transaction timing and execution risk,” a spokesperson for Premier Farnell said in a statement, “and considers the Avnet Offer to represent a superior offer for Premier Farnell shareholders, as compared to the Dätwyler Offer.” Bet your bottom dollar, it does.

There are lots of questions here, mostly centered on timing. U.K. markets are reeling without a sense of which way is up from the Brexit vote, and North American markets are taking advantage of that. In addition, what role did Hamada play in all this? It seems unlikely that talks for this acquisition weren’t at least in consideration before Board of Directors member Bill Amelio took the office of interim CEO in June, which leaves some Avnet-watchers leery of the company’s unified support of the deal.

There are upsides to the move for Avnet, to be sure. Premium Farnell has a long history of digital collaboration and a robust customer list. But if that’s enough to offset both its own troubled recent history as well as the turmoil on Avnet’s home turf remains to be seen.