Avnet 2011 Annual Report Download - page 53

Table of Contents
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Bell and Unidux acquisitions and purchase price are described further below. The remaining acquisitions completed during
fiscal 2011 were acquired for an aggregate purchase price of $124,678,000, net of cash acquired.
Also during fiscal 2011, the Company recognized restructuring and integration charges, and transaction and other costs
associated with the acquisitions, all of which were recognized in the consolidated statement of operations and are described further in
Note 17.
Unidux, a Japanese publicly traded company, was acquired through a tender offer in which the Company obtained over 95%
controlling interest. The non-controlling interest was recorded at fair value but was not material. The acquisition of the non-
controlling
interest in Unidux was completed during the second quarter of fiscal 2011. As mentioned, Unidux was a publicly traded company
which shares were trading below its book value for a period of time. In a tender offer, Avnet offered a purchase price per share for
Unidux that was above the prevailing trading price thereby representing a premium to the then recent trading levels. Even though the
purchase price was below book value, 95% of the Unidux shareholders tendered their shares. As a result, the Company acquired
Unidux net assets excluding cash of $163,770,000 for a purchase price of $132,780,000, net of cash acquired, and recognized a gain
on bargain purchase of $30,990,000 pre-
and after tax and $0.20 per share on a diluted basis. Prior to recognizing the gain, the
Company reassessed the assets acquired and liabilities assumed in the acquisition.
Bell
On July 6, 2010, subsequent to fiscal year 2010, the Company completed its acquisition of Bell, a value-
added distributor of
storage and server products and solutions and computer components products, providing integration and support services to OEMs,
VARs, system builders and end users in the U.S., Canada, EMEA and Latin America. Bell operated both a distribution and single tier
reseller business and generated sales of approximately $3.0 billion in calendar 2009, of which 42%, 41% and 17% was generated in
North America, EMEA and Latin America, respectively. The consideration for the transaction totaled $255,691,000 which consisted
of $7.00 in cash for each share of Bell common stock outstanding, cash payment for Bell equity awards, and cash payments required
under existing Bell change of control agreements, plus the assumption of $323,321,000 of Bell net debt. Of the debt acquired, Avnet
repaid approximately $209,651,000 of debt (including associated fees) immediately after closing. As of the end of fiscal 2011, the
Company had completed the integration of Bell into both the EM and TS operating groups and has achieved its anticipated cost saving
synergies, for which the full impact of the cost savings benefit is expected to be reflected in the first quarter of fiscal 2012.
Preliminary allocation of purchase price
The Bell acquisition was accounted for as a purchase business combination. Assets acquired and liabilities assumed are recorded
in the accompanying consolidated balance sheet at their estimated fair values, using management’
s estimates and assumptions, as of
July 6, 2010 (see following table).
As a result of the evaluation of the fair value of the acquired assets and assumed liabilities, the Company recognized $60,000,000
for an identifiable amortizable intangible asset (see Note 6).
During the second quarter of fiscal 2011, the Company recognized a contingent liability of $18,000,000 for potential unpaid
import duties associated with the former Bell Latin America business. Prior to the acquisition of Bell by Avnet, U.S. Customs and
Border Protection (“CBP”) initiated a review of the importing process at one of Bell’
s subsidiaries and identified compliance
deficiencies. Subsequent to the acquisition of Bell by Avnet, CBP began a compliance audit to identify any duty owed as a result of
the prior non-
compliance. As of July 2, 2011, the Company continued to evaluate the potential exposure based upon further activities
associated with the audit and the Company’
s ability to obtain appropriate documentation for certain transactions under audit. The
Company has evaluated projected duties, interest and penalties that potentially may be imposed as a result of the audit and, as further
information has become available during the fourth quarter of fiscal 2011, the Company reduced the contingent liability from
$18,000,000 to $10,000,000, which was recorded to goodwill. Depending on the ultimate resolution of the matter with CBP, the
Company estimates the range of the potential exposure associated with this liability may be up to $73 million; however, the Company
believes the contingent liability recorded is a reasonable estimate of the liability based upon facts available at this time.
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