Insight swallows Action in $150 million deal

All share transaction

Insight has confirmed that it is the mystery suitor for Action Computer Supplies, through an agreed $150 million bid for the UK direct marketer. The Arizona-headquartered reseller already operates in Europe with subsidiaries in the UK and Germany. But this deal will see it increase business in Europe massively. Action is the UK's biggest direct marketer of PCs and peripherals, and it also maintains a small to middling-sized operation in Spain. Last month, the company issued a profits warning, following a slump in PC sales to corporates in January and February. In March, Action confirmed it was in takeover talks with an unnamed company, following a leak in the Daily Mail. Industry speculation centered Insight and US rival Global Direct Mail, which bought UK PC build Simply Computers earlier this year. Insight's all share offer works out 260.7p per Action share, based on the company's closing share price of $26.625 on 7 May. This is 28 per cent higher than Action's closing share price on the same day. Insight will issue 5.64 million new shares to fund the deal. Post-acquisition, Action shareholders will own 18 per cent of the enlarged Insight group. An all share deal looks sensible, although Action's small shareholders may be unhappy with the transfer of their stock to the US. Even so, the deal is not hugely generous. Action's shares have been in the doldrums recently, and bid talk has lifted the share price only back to where it used to be. On the other hand, who would want to pay hard cash these days for a low-margin cash-eating computer dealership? ®

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