Avnet Inc. (AVT) recently announced that it will acquire IT distributor Amosdec SAS. The transaction is expected to close in July, 2011. Financial terms were not disclosed.

Headquartered in Paris, Amosdec provides virtualization and storage management solutions.

Avnet will expand its footprint in Europe by leveraging its strength in data center and Amosdec’s position in software and services. Further, the company expects to provide new business opportunities with integrated and cost-effective solutions to its partners.

Amosdec generated revenues of US$90 million in fiscal 2010. Management expects that the transaction will enhance Avnet’s earnings immediately and support the company to attain a return on capital of 12.5% within two years. Post acquisition Amosdec will form a part of Avnet Technology Solutions, EMEA.

Avnet expects to continue pursuing strategic acquisitions as a part of its overall growth plan, with its focus directed primarily at smaller targets in markets where the company has been seeking to expand its presence.

In the past the company had acquired Bell Micro and Tallard, which will firmly establish Avnet as a leading value-added IT distributor in the fast-growing Latin American region. Further, other acquisitions such as itX Group Limited, Broadband Integrated Resources and Unidux Inc. are also likely to fuel revenue growth.

However, we believe that this aggressive acquisition strategy puts pressure on margins. Thus, we have a long-term Neutral recommendation on the stock and prefer to wait on the sidelines until we see an expansion in margins and realization of synergies from acquisitions.

We have a short-term Zacks #2 Rank (Buy rating) on the stock, encouraged by better-than- expected results of the third quarter of fiscal 2011.

Based in Phoenix, AZ, Avnet is one of the world’s largest distributors of electronic components and computer products. The company directly competes with Arrow Electronics Inc. (ARW).

 
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