Inacom - Vanstar deal creates world's biggest reseller

Job cuts galore

Inacom has emerged as the winner in the race to acquire Vanstar, the US reseller with the very public for sale tag around its neck. The combined group will be the world's biggest product reseller, with $7 billion annual billings and 12,000 staff.

Inacom will gouge out $150 million cost savings through economies of scale. With Vanstar under its belt, the company has the kind of critical mass to enhance its growth potential. As if it weren't big enough already.

What does this say for the economies of scale for an Elcom - say - which has to make do with revenues of a mere $1 billion or so? Inacom anticipates a one-off hit of $120m-$155m will pay for redundacies, purchase commitment cancellations, and elimination of duplication functions and facilities.

On completion of the acquisition, Inacom will front up an additional $40 to $80 million to "align the combined companies' operations to meet the changing conditions of the industry". This sounds like management speak for even more redundancies. Vanstar has already announced a restructuring charge of $50 million for its Q2.

For tax reasons, the Vanstar takover is constructed as a merger or pooling of interests. Vanstar shareholders will get 0.64 shares of Inacom common stock for each share of Vanstar Common stock. Warburg Pincus, owner of 38 per cent of stock, has voted in favour of the deal. Inacom expects the transaction will be accretive to earnings by the end of 1999. ®

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