New offer to acquire distributor forces Apollo Management to increase bid
Famed investor Warren Buffett apparently wants to get into technology distribution. CNBC reports that his multinational conglomerate holding company, Berkshire Hathaway, made an offer to buy Tech Data, forcing the incumbent suitor to raise its offer in what could become a bidding war.
The Lowdown: Just before the Thanksgiving break, Berkshire Hathaway submitted an undisclosed bid to acquire Tech Data, the world’s second-largest technology distributor. A week prior, CNBC reports, Buffett said he would bid as much as $140 per share — or roughly $6 billion — for the company.
The Details: Earlier this month, private equity firm Apollo Global Management announced it was acquiring Tech Data for $5.4 billion. The Berkshire Hathaway bid caused Apollo to sweeten its offer to $6 billion.
The Impact: While Apollo is the lead contender to acquire Tech Data, the distributor has until Dec. 9 to collect counterbids. The Berkshire Hathaway offer is the only known alternative offer on the table. Tech Data’s valuation is approximately $5.1 billion, and it carries debt of $1.5 billion. It’s unclear whether anyone will try to match or beat Apollo’s new bid. Buffett has a history of buying undervalued assets and turning them into profit powerhouses. However, Berkshire Hathaway isn’t known for paying premium prices in its acquisitions. If bidding for Tech Data drives the price up further, Berkshire Hathaway is likely to walk away.
Background: Tech Data surprised the technology community and channel in October when it announced the acquisition by Apollo. Just weeks later, Tech Data acquired DLT for an undisclosed amount. The acquisition of Tech Data by Apollo is part of an ongoing consolidation trend in the distribution segment of the technology industry.