Computer products direct marketer Insight Enterprises Inc., Tempe, AZ, said Sunday that it has agreed to acquire Action Computer Supplies Holdings plc, a London-based technology direct marketer with operations in the United Kingdom and Spain, in a stock-for-stock transaction valued at approximately $150 million.
The purchase of Action, which had sales of about $460 million in the fiscal year ended Feb. 28, is the largest in a series of acquisitions by Insight that are broadening the company’s global reach. The combined companies will have annualized sales of more than $1.6 billion.
“I believe it is a good, strategic acquisition for them,” said Michael Rosen, an analyst with Blackford Securities, Garden City, NY. “I like the fact that it’s accretive to earnings, and I like the fact that it operates within Insight’s own line of business – they bought a business that is similar to theirs.”
Action and Insight both market brand-name computer products to businesses through catalogs and the Internet. Action also utilizes a field sales force and has more of a focus on large businesses and on providing field service than does Insight, which has concentrated on targeting small and medium companies. Insight, meanwhile, relies more on outbound telemarketing than Action does and also uses a different distribution model.
“They have a very similar culture and a very similar business, but we do see opportunities in bringing our business model to them,” said Valerie Paxton, vice president of corporate communications at Insight. “Basically they are like Insight was a few years ago. We want to leapfrog them into the business model that’s been successful for Insight in the U.S.”
In addition to adding outbound telemarketing to Action’s arsenal of strategies, Insight also plans to introduce more electronic marketing and the virtual-inventory system that Insight employs in the U.S., in which products are shipped directly to customers from distributors. Action currently maintains its own inventory for the 13,500 products it offers. The moves all are designed to reduce Action’s operating expenses, Paxton said.
In addition to its British business, Action also derives about 5 percent of its revenues from a small computer-products reseller in Spain. Insight, meanwhile, has operations in Germany that it acquired in December of last year.
Paxton said Insight planned to retain the senior management of Action, which she said had extensive international experience managing other companies.
Both companies have been seeking to increase their Internet revenues. Insight tallied 8.2 percent of its sales in the first quarter through unassisted Web sales, while Action said 8.6 percent of its revenues were unassisted Web sales in the six-month period ended in February.
Paxton said no announcements had been made about the fate of Insight’s British subsidiary in Worksop, England, which it acquired last year. That division, which also markets Internet access though its own Internet service provider, employs about 900, she said.
Rosen said Insight told analysts that the company wanted to combine all its operations into a unified system, although it outlined no specific plans for the Worksop division.
“I think they’d like to brand the Insight.com name on a worldwide basis,” he said. “I think what Insight is trying to do is make their name synonymous with selling computers to business.”
The acquisition is expected to close by the end of September. It requires the approval both of Action shareholders and of the British courts, Paxton said..
According to terms announced yesterday, Action shareholders will receive 0.16 shares of Insight stock for each Action share they own. Insight will issue about 5.64 million new shares, or 18.1 percent of the ownership of the pro forma company, to complete the purchase.
Insight’s stock traded up yesterday about $2.30, closing at about $28.90.
