CDW grabs a slice of Kelway
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CDW has bought a 35 per cent stake in Kelway for an undisclosed sum as the reseller behemoth positions itself for future growth and aims to smash the £1bn barrier.
The two firms have been linked together for 18 months through trade agreements, but in the summer rumours emerged that there was more to it, a rumour that was denied by CEO Phil Doye when CRN put it to him at the time.
According to a statement, the deal, which takes former private equity backer Core Capital out of the equation, will provide near and long-term returns to shareholders, and enable the company to invest in its future.
Doye and managing director Dan Laws still remain majority shareholders of the business, which hit £500m turnover in its latest financials, signalling ten consecutive years of growth.
Last year CRN revealed that Kelway had outgrown Core, and was on the hunt for a new PE backer to support its next phase of growth.
The agreement includes a 59 per cent increase in its quarterly cash dividend and authorisation of a new $500m share repurchase programme.
In a four-point plan, CDW said it plans to increase dividends annually, maintain new debt/adjusted EBITDA leverage in the range of 2.5 to three times, supplement organic growth with ‘strategic, tuck-in acquisitions’ and return excess cash after dividends to shareholders.
Thomas Richards, chairman and CEO of CDW, said in a statement: "Today's actions reflect the confidence we have in our strategy and our ability to continue to deliver sustained, profitable growth and cash flows. They also demonstrate our commitment to ensuring we continuously deliver enhanced value to customers, partners, co-workers and investors."
Ann Ziegler, CFO of CDW, added: "As we approach our previously announced leverage target ratio of about 3.0 times, it is appropriate to update shareholders on our capital allocation strategy and refreshed priorities. When combined with expected operating performance, these priorities support our new medium-term targets starting in 2016, which include low double-digit annual earnings per share growth."
In a statement, Doye added: “Today’s announcement is a significant one and combined with the investment from CDW will enable us to accelerate towards our £1bn revenue goal. Having worked with CDW for over 18 months on joint client opportunities, this investment feels like a natural next step in our partnership.”
Mike Norris, chief executive of Computacenter, said he was "marginally" interested in the news.
"I'm fascinated by it, but it doesn't matter to me," he said. "Kelway are a good company but I just don't compete with them."