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Filed by Kent Electronics Corporation
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: Kent Electronics Corporation
Commission File No. 0-14643
Following is a joint press release issued by Avnet, Inc. and Kent
Electronics Corporation, relating to a proposed transaction whereby a
wholly-owned subsidiary of Avnet would merge with and into Kent, and Kent would
become a wholly-owned subsidiary of Avnet:
AVNET TO ACQUIRE KENT ELECTRONICS IN STOCK TRANSACTION
o Acquisition Fits Avnet's Strategy of Increased Product Focus
and Specialization
o Kent Shareholders to Receive 0.87 of a Share of Avnet for
each Kent Share
o Both Companies Comment on Outlook for March 2001 Fiscal
Quarters
Phoenix, AZ/Houston, TX, Avnet, Inc. (NYSE:AVT) and Kent Electronics
Corporation (NYSE:KNT) announced that they have reached a definitive
agreement for Avnet to acquire Kent in a stock-for-stock merger
transaction valued today at approximately $550 million, including
approximately $50 million of cash currently on the books of Kent in
excess of debt assumed. Under the terms of the agreement, Kent
shareholders will receive 0.87 of a share of Avnet for each share of
Kent on a tax-free basis. The merger has been approved by the boards
of directors of both companies and is subject to the approval of the
shareholders of both companies as well as customary regulatory
approvals. The transaction is expected to be accounted for as a
pooling-of-interests and to be completed within the next 90 days.
Avnet, Inc. is one of the world's largest distributors of electronic
components, computer products and imbedded systems from leading
manufacturers. Kent, with sales of approximately $1 billion, is a
recognized leader in the electronics distribution industry in North
America. Kent has two operating groups, Kent Components which focuses
on specialty distribution of interconnect, passive and
electromechanical components and Kent Datacomm which is an enterprise
solution network integrator.
Roy Vallee, Avnet's chairman and chief executive officer said, "We
have long admired Kent's talented employees and their ability to
profitably build its market share in the distribution of interconnect,
passive and electromechanical (IP&E) components. By combining Kent's
electronic components operation, which has annualized sales of over
$500 million, with Avnet's Electronics Marketing (EM) group's domestic
IP&E business, we will create the largest specialty components
distributor of its kind in North America. This new $1.6 billion
division will be highly-focused and able to provide IP&E products and
value-added services to a broad North American customer base. Larry
Olson, Kent's current president and chief executive officer will be
president of this new division, reporting to Steve Church,
co-president of Avnet EM. The division will be headquartered in
Phoenix."
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Mr. Vallee went on to note that Kent Datacomm, Kent's network
integration equipment and services operation, will remain in Houston
and become a new division within Avnet's Computer Marketing Group
(CM). CM is comprised of divisions focused on specific suppliers,
enterprise solutions and integrated services. "Following the Kent
acquisition, Avnet Computer Marketing is expected to have annualized
revenues in excess of $3 billion, of which more than 80% should be
derived from sales of six strategic supplier partnerships: Compaq,
EMC, Hewlett-Packard, IBM, Oracle and now as a result of the
acquisition, Cisco. Mark Zerbe will continue as division president and
report to Avnet Computer Marketing's president, Andy Bryant."
Mr. Vallee continued, "The Kent acquisition is part of Avnet's
strategic plan to accelerate its earnings growth rate through
increased product focus and specialization on a global basis. Upon the
completion of this transaction and considering the recent
organizational changes in Avnet's $4 billion European operations,
Avnet expects that, beginning July 1, 2001, more than two-thirds of
its annualized revenues could be derived from its specialized products
and services divisions."
The transaction is expected to be slightly dilutive to earnings per
share for the first one or two full quarters of combined operations
and it is anticipated that the resulting synergies, operating leverage
and financial benefits of the Kent acquisition will make it accretive
thereafter. The Kent transaction strengthens Avnet's financial
position by contributing strong earnings and operating cash flow
which, coupled with Kent's strong balance sheet, will result in a
favorable improvement in Avnet's debt to capital ratio and other
credit statistics.
Morrie Abramson, Kent's chairman and co-founder said, "I believe that
Avnet will be an excellent partner for Kent, supporting the growth
that we have achieved to date and enabling us to increase customer
penetration through Avnet's global organization, broad range of
product offerings, and supply chain management capabilities. Equally
important, we are confident that our corporate cultures are
compatible."
Larry Olson, Kent's president and chief executive officer noted, "In
merging with Avnet, we believe we are ensuring the continued growth of
Kent's two core businesses as well as providing an exceptional
platform to address the globalization of our industry. The
cross-selling opportunities for both specialty components and network
integration are substantial, and Kent's expertise fits perfectly with
Avnet's specialization strategy."
CURRENT QUARTER GUIDANCE
With their fiscal quarters close to completion, and within the context
of the well-documented downturn in the electronics industry, Avnet and
Kent are commenting on their outlooks for the periods ending March 30,
2001 and March 31, 2001, respectively.
Avnet expects revenues for its third fiscal quarter ending March 30,
2001 to approximate $3.2 billion, an increase of 19% from last year's
third quarter, but a sequential decline of about 6% from second
quarter fiscal 2001 levels. A sharp decline in demand for electronic
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components in North America and Asia and somewhat weaker computer
product sales penalized sequential revenue growth.
Earnings per diluted share for the fiscal 2001 third quarter are now
likely to be in the range of $0.60 to $0.65, compared with $0.56 in
the fiscal 2000 third quarter, and $0.78 in the fiscal 2001 second
quarter. Avnet will release its fiscal 2001 third quarter results on
or about April 26, 2001 and will provide guidance with respect to the
fiscal 2001 fourth quarter at that time.
Kent Electronics expects revenues for its fiscal 2001 fourth quarter
ending March 31, 2001 to be within the range of $230 million to $240
million. This represents a 4% - 8% increase over the comparable
year-ago quarter and is basically flat on a sequential basis. As
anticipated, Kent's network integration business should post a
double-digit sequential revenue increase over fiscal 2001 third
quarter levels; however, company-wide fiscal fourth quarter revenues
and earnings are expected to be penalized by reduced demand for
specialty electronic components. Therefore, based on currently
available information, Kent is likely to report fiscal 2001 fourth
quarter earnings per diluted share of $0.30 to $0.33, comparable to
the prior quarter, but below current First Call analyst consensus
estimates of $0.35.
In summary, Mr. Vallee noted, "The Kent acquisition represents both
important strategic and financial benefits for Avnet. We believe it
will accelerate our ability to build a specialist IP&E business in
North America, enter the high-growth network integration market,
enable us to further leverage our infrastructure, and enhance our
Company's financial flexibility."
CONFERENCE CALL/WEBCAST SCHEDULED
A conference call detailing the announcement has been scheduled for
1:00 PM EST (12:00 Noon CST/11:00 AM MST/10:00 AM PST). Please dial
(719) 457-2604 to listen to the call. In addition, a live internet
broadcast will be available via Avnet's web site at
http://www.avnet.com/ on the Investor Relations home page under
Calendar of Events. The confirmation number is 525756. A replay will
be available approximately 2-3 hours after the call ends until Friday,
March 30, 2001. To access the replay, please dial (719) 457-0820,
confirmation number 525756.
FORWARD-LOOKING STATEMENTS
This press release contains certain "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These statements
are based on management's current expectations and are subject to
uncertainty and changes in circumstances. Actual results may vary
materially from the expectations contained in the forward-looking
statements. The forward-looking statements herein include statements
addressing future financial and operating results of Avnet and Kent,
and the timing, benefits and other aspects of the proposed merger.
The following factors, among others, could cause actual results to
differ materially from those described in the forward-looking
statements: inability to obtain, or meet conditions
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imposed for, governmental approvals for the transaction; failure of
the shareholders of Avnet or Kent to approve the merger; the risk
that the businesses of Avnet and Kent will not be integrated
successfully; failure to obtain and retain expected synergies; and
other economic, business, competitive and/or regulatory factors
affecting the businesses of Avnet and Kent generally.
More detailed information about these factors is set forth in Avnet's
and Kent's filings with the Securities and Exchange Commission,
including each of their Annual Reports on Form 10-K for fiscal 2000
and their most recent quarterly reports on Form 10-Q. Avnet and Kent
are under no obligation to (and expressly disclaim any such obligation
to) update or alter their forward-looking statements, whether as a
result of new information, future events or otherwise.
ADDITIONAL INFORMATION
In connection with their proposed merger, Avnet and Kent will file a
joint proxy statement/prospectus with the Securities and Exchange
Commission. Investors and security holders are advised to read the
joint proxy statement/prospectus when it becomes available, because it
will contain important information. Investors and security holders may
obtain a free copy of the joint proxy statement/prospectus (when
available) and other documents filed by Avnet and Kent at the
Securities and Exchange Commission's web site at www.sec.gov. The
joint proxy statement/prospectus and such other documents may also be
obtained for free from Avnet or from Kent by directing such request to
Avnet, Inc., Investor Relations Department, 2211 South 47th Street,
Phoenix, AZ 85034, Telephone: (480) 643-7291; or to Kent Electronics
Corporation, Shareholder Relations, 1111 Gillingham Lane, Sugar Land,
TX 77478, Telephone (281) 243-4000.
Houston, Texas-based Kent Electronics is among the largest publicly
traded specialty electronics distributors and network integrators.
Kent Components provides distribution and value-added services with a
focus on interconnect, passive and electromechanical components. Kent
Datacomm provides complete end-to-end networking solutions, including
design, consulting, source selection, product configuration and
installation, and warranty and technical support. Kent's Web site is
located at www.kentelectronics.com.
Phoenix, Arizona-based Avnet, Inc., a Fortune 500 company with annual
sales exceeding $11.7 billion, is one of the world's largest
distributors of semiconductors, interconnect, passive and
electromechanical components, computer products and enterprise
solutions and embedded systems from leading manufacturers. Serving
customers in 63 countries, Avnet markets, inventories and adds value
to these products and provides world-class supply-chain management and
engineering services. Avnet's Web site is located at www.avnet.com.
For further information, please contact:
AVNET, INC. John Hovis - SVP Investor Relations - (480) 643-7053
Al Maag - Chief Communications Officer - (480) 643-7719
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KENT ELECTRONICS Stephen J. Chapko - EVP & CFO - (281) 243-4000
Morgen-Walke Associates - (212) 850-5600
Robert P. Jones or Theresa Vogt
Media: Brian Maddox or Anne Marie Gaschler
# # # # #
Avnet and its directors and executive officers may be deemed to be
participants in a solicitation of proxies from Avnet shareholders relating to
the proposed transaction. Collectively, as of February 27, 2001, the directors
and executive officers of Avnet beneficially owned approximately ____% of the
outstanding shares of Avnet common stock.
Kent and its directors and executive officers may be deemed to be
participants in a solicitation of proxies from Kent shareholders relating to
the proposed transaction. Collectively, as of March 21, 2001, the directors and
executive officers of Kent beneficially owned approximately 5.8% of the
outstanding shares of Kent common stock.
In addition, a number of Kent executive officers and directors have
interests in the merger that are, or may be, different from the interests of
other Kent shareholders. They include the following:
o Morrie K. Abramson, the Chairman of the Board and
co-founder of Kent, will receive a retirement benefit of
$250,000 per year, subject to future cost of living
adjustments, under a consulting agreement with Kent which
will be payable until the last to occur of fifteen years,
his death or the death of his wife. This agreement will be
terminated in connection with the merger, and in accordance
with its terms, Kent will pay Mr. Abramson a lump sum payment
estimated at $29,000,000 in settlement of the above payments
and a change in control payment provided for in the
agreement. Mr. Abramson will also receive additional
payments to hold him harmless from the effects of federal
excise taxes imposed on "golden parachute" payments.
o The merger will result in a change in control of Kent as
defined in the severance agreements it has with six other
executive officers, under which agreements and the merger
agreement they will have the right to receive substantial
cash payments upon the consummation of the merger equal to
one or two times their highest recent annual cash
compensation.
o In addition, all their unvested employee stock options will
immediately vest if their employment is terminated for any
reason, with or without cause. Certain of such officers will
also receive additional payments to hold them harmless from
the effects of excise taxes imposed in respect of the
foregoing payments and option accelerations.
o Avnet has entered into two-year employment agreements,
effective as of the effective time of the merger, with Larry
D. Olson, Kent's chief executive officer and president, and
Mark A. Zerbe, an executive vice president of Kent, which
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agreements provide for annual salary and incentive
compensation aggregating not less than $600,000 for Mr. Olson
and $425,000 for Mr. Zerbe.
o Upon completion of the merger, Avnet will assume Kent's
obligations under Kent's employee and director stock option
plans, so that the outstanding Kent options will become
options to purchase Avnet shares in a number and at an
exercise price adjusted to reflect the exchange ratio for the
merger.
o Avnet has agreed to indemnify Kent's past and present
directors and officers to the fullest extent permitted by
Texas law for serving in their capacities as such, and has
agreed to maintain their directors' and officers' liability
insurance coverage for six years following the merger.
Avnet and Kent security holders are advised to read the registration
statement and joint proxy statement/prospectus to be filed by Avnet with the
SEC regarding the proposed transaction, when it becomes available, because it
will contain important information. Avnet and Kent securityholders may obtain a
free copy of the registration statement and joint proxy statement/prospectus,
when available, and other documents filed by Avnet at the SEC's web site at
www.sec.gov, or by requesting such information from Avnet, Inc., 2211 South
47th Street, Phoenix, Arizona 85034 (tel: 480-643-2000), Attention: Raymond
Sadowski, Chief Financial Officer.