PIOS ALERT:
read below in bold...and it's not going to be veba!!!arw/pios!!
.
.
.
October 04, 1999, Issue: 1180
Section: News
--------------------------------------------------------------------------------
VEBA up for sale; but to whom?
Crista Souza and Barbara Jorgensen
With its sole shareholder planning to exit the electronics industry, the future of distributor VEBA Electronics LLC has become uncertain.
Rumors of an initial stock offering swirled through the market last week as North America's third-largest electronic-components distributor was being packaged for sale by its parent, utilities conglomerate VEBA AG of Dusseldorf, Germany. VEBA is merging with another utilities giant, Viag AG of Munich, Germany, and is getting out of non-core businesses.
Although no documents have been filed in preparation for an IPO, a company spokesman indicated that such a move is being championed within the parent organization.
Still, market watchers aren't ruling out the possibility of a buyout by a competitor. Such a sale could have major implications within the electronics supply chain, given the continued consolidation.
The distributor unit-with sales approaching $5 billion-is seen as a prime target for Arrow Electronics Inc. or Avnet Inc., which have aggressively expanded their global distribution empires through acquisitions.
"There's a short list of people who could do this deal," one industry insider said. "You don't have to go much beyond the A's in the alphabet." Arrow declined to comment.
Roy Vallee, chairman and chief executive of Phoenix-based Avnet, admitted the company's hands are full with its pending acquisitions of Marshall Industries, SEI/Eurotronics, and SEI/Macro, but left open the possibility for a tie-up with VEBA. "I wouldn't rule anything out," he said, though he declined to say whether the companies have been in contact in that regard.
Another potential takeover candidate is Pioneer-Standard Electronics Inc., which ranks behind Avnet, Arrow, and VEBA. "It makes sense for us to at least look at it," said a company insider, who asked that his name not be used. "It would be great to get Xilinx or Altera," he said, referring to the two major PLD lines sold under the VEBA umbrella. Analysts questioned, however, whether Pioneer would have the financial backing to pull off the deal.
Still, analysts haven't yet put a price tag on the distributor.
"The truth is, we haven't seen the numbers," said one source in the investment community. "We're just speculating. There could be antitrust issues in the U.S., plus you are looking at loads of supplier issues."
Overseas, industry analysts say it is unlikely VEBA will break apart its global distribution empire to be sold piecemeal. That being the case, the question remains as to what price VEBA would ask for its distribution businesses and whether Arrow or Avnet, or perhaps an outside investment firm, would ante up.
"VEBA has spent a lot of time and money integrating its distribution businesses from the European standpoint and, more recently, the worldwide standpoint," said Gary Kibblewhite of Europartners Consultants, Herts, England. "I don't think they would want to break up the business, and in Europe they can't. They have a centralized warehouse serving their various distribution companies."
Although Kibblewhite said the likelihood is "quite high" that VEBA will be acquired, "it's likely the price will also be quite high. They are a very profitable business."
Indeed, the company's sales growth has been strong, with 1999 revenue through August up 23% year over year, VEBA said.
While Arrow and Avnet have been quick to integrate newly acquired operations to present a single face to the customer, VEBA's value lies in the distinctiveness of its distribution units, company executives said.
VEBA Electronics' distribution operations include Impact Technologies, Insight Electronics, Unique Technologies, and Wyle Electronics in the United States; and EBV Elektronik, the Memec Group, and other companies in Europe and Asia. Each distributor provides sales, marketing, and engineering services for a limited number of suppliers. The units are linked globally through VEBA's Atlas Services fulfillment operation.
By structuring its business this way, VEBA has been able to carry a number of competing product lines that would not otherwise share the same distributor shelf. Suppliers say VEBA affords them a level of technical focus that is unmatched by many broad-line distributors.
For instance, Insight carries the Xilinx line, while Wyle carries Altera. In addition, Wyle and Insight carry IDT, while Unique carries Cypress. And the Actel line was shifted from Wyle to Unique about the same time Actel acquired marketing rights to the Gatefield product, which competes with Altera.
At least one VEBA supplier didn't seem too concerned about the announcement.
"In general, our experience with the VEBA companies is they are excellent demand-creating distributors, although we are not really surprised [VEBA AG] would consider this move if you consider their overall set of holdings," said Scott Delaney, director of global marketing for ON Semiconductor Inc., Phoenix.
ON, whose products are carried by Atlas, EBV Elektronik, and Wyle, is taking a wait- and-see attitude "until we see the final destination of the VEBA Electronics Group. I think the group is big enough to go it alone."
Both VEBA AG and VEBA Electronics management were unavailable for comment last week. But in a memo to employees, obtained by EBN, VEBA Electronics chief executive Ferdinand Pohl said the distribution group's goal "will be to adopt a plan that will enable VEBA Electronics to maintain its industry-leading growth rate and build upon its position as the number-one value-added electronics distributor in the world."
Pohl said the company will "not consider alignment with other companies in our industry which could dilute our demand-creation leadership and limit our ability to grow at a rate that sets us apart from our competitors."
A spokesman stressed that "VEBA is not interested in being sold to a competitor."
Discussions with VEBA AG are expected to kick off shortly, aimed at adopting a strategy for continued growth without the backing of the deep-pocketed conglomerate.
A public stock offering is favored by VEBA management, although a sale to an investment company is also a strong possibility, the company said.
In a statement, VEBA said that it will "systematically" divest all but its core businesses of energy and specialty chemicals |
