Synnex to Split Into Two Separate Companies
Synnex Technology Solutions to remain an IT distributor, while Concentrix will focus on business services
Giant IT distributor Synnex plans to split into two separate companies later this year, with one continuing to focus on distribution and the other on business services.
The Lowdown: In announcing the decision this week, Synnex echoed the message that other high-profile tech vendors like Hewlett-Packard made when it split into two companies in 2015, saying that the move will enable a sharper strategic focus for both.
The Details: Synnex will complete the split into two publicly traded companies in the second half of the year. One company, Synnex Technology Solutions, will continue as an IT distributor, one of the top three in both the Americas and Japan, with about $19 billion in annual revenue. The company will offer an array of distribution, integration, and logistics services to the tech industry.
The other company will be Concentrix, a customer experience provider with about $4.7 billion in annual revenue. Synnex said Concentrix will be among the top two providers of business services in the world, supporting more than 125 Global Fortune 2000 organizations and more than 50 high-growth clients in more than 275 locations globally. Synnex bought Concentrix in 2006.
Other details about the split include:
> Management: Dennis Polk will continue as president and CEO of Synnex, while Chris Caldwell, president of Concentrix, will become president and CEO of the new company. Concentrix in the coming months also will pull together a board of directors.
> Timing: Synnex will continue operating per usual until the deal is finalized. Once the split is done, Synnex shareholders will own shares of both of the companies at the same percentage that they owned pre-split Synnex shares. The separation will not require a shareholder vote, but will need a final approval of the Synnex board and the filing of appropriate regulatory and tax documents.
The Impact: Polk said during a conference call that Synnex officials had regularly considered separating Synnex and its wholly owned subsidiary Concentrix, given the distinct nature of their businesses, but opted to instead grow both businesses as a single entity. After buying business service vendor Convergys in 2018 and integrating into Concentrix, the decision was made to split the company, he said.
Background: The announcement about the separation came as Synnex reported strong fourth-quarter financial numbers. In the last three months of 2019, Synnex generated $5.4 billion in revenue, up 17.4% year-over-year. Concentrix revenue was up 24.7% over the same period in 2018, reaching $1.2 billion.
The Buzz: “Today, Synnex is taking affirmative steps to further drive shareholder value by announcing our plan to separate into two strong, independent public companies,” Polk said. “The spin-off will provide each company with sharper strategic and managerial focus and enable Synnex shareholders to own and value each business separately. We are very proud of our company and the returns we generated by investing in IT distribution and CX services over our nearly 40-year history. We are equally proud to have these two businesses reach a point where they are industry leaders and positioned well to be successful stand-alone public companies.”
“With Concentrix achieving its current scale and efficiency ahead of expectations, coupled with the market opportunities ahead of us, the appropriate time to separate is now,” Caldwell said. “The separation of the two businesses will enhance each company’s competitive position and accelerate significant value creation opportunities. I, along with the rest of the Concentrix team, am grateful for our time within the Synnex family and look forward to continuing the successful Synnex legacy.”
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