CDW intends to take up to full ownership of Kelway by 2017

US giant describes Kelway investment as a 'strategic tuck-in'

US reseller giant CDW has said it plans on swallowing up to 100 per cent of Kelway by the middle of 2017 as it opens up over its purchase of a minority stake in the UK firm.

Yesterday, the US company snapped up 35 per cent of Kelway for an undisclosed sum, which its chief executive Phil Doye told CRN would relieve his firm – in which he now has a 55 per cent stake – of private equity headaches.

The announcement tied in with CDW unveiling its third-quarter results. For the three months to 30 September, its net profit reached $55.6m (£35.12m) compared with a net loss of $2.2m the year before, on sales which jumped 14 per cent to $3.27bn over the same period. Average daily sales in the third quarter reached $51m, compared with $44.8m a year ago.

On the CDW earnings call, its chief executive Tom Richards said if the Kelway deal goes well, his company could end up taking it over in its entirety before too long.

"The transaction is structured so that we can take up to as much as 100 per cent ownership through mid-2017, which we intend to do if the business performs as planned," he said.

Yesterday Doye said it would be a "natural next step" for CDW to extend ownership of the firm, but added: "There is no guarantee and there is optionality around it – if things don't work out as planned, we could buy CDW out of the partnership too."

CDW's Richards described the Kelway investment as a "strategic tuck-in" which adds resources which would be "either too lengthy to develop or too costly on our own".

He added: "Kelway also provided us with additional geographic diversity, adding to the benefit we already received from our balanced portfolio of channels in a relatively low-risk way. Whenever you make an investment in another business, culture is a key factor of its success.

"Having worked with Kelway as a strategic partner for more than 18 months, we know that their values and culture are very much aligned with ours, as is their value proposition to their customers and vendor partners. A great fit all around."

Softcat chairman Martin Hellawell welcomed the news and said it was positive for the wider channel.

"I think CDW are an excellent company and I'm pleased that a very respectable, sound business who understands our industry very well is the acquirer of a minority share. It adds credibility to the industry and I'm glad it wasn't a financial house as the last thing we need is any more financial problems in this industry."