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The purchase did not include the DDI operations in Kansas City, MO, which Anixter had previously purchased under a separate agreement, or the DDI operations in Portland and Medford, OR. In connection with the purchase, Anixter assumed certain obligations of DDI under the facility and operating leases used in conjunction with the acquired operations and Anixter extended offers of employment to the employees of DDI in the acquired operations.
As a result of an active auction process in the DDI bankruptcy proceeding involving multiple bidders, the final purchase price for the operations and assets of DDI was $33 million. This final price compares with Anixter's initial purchase offer of $25 million combined with an expectation that Anixter would make offers to purchase certain valid, unsecured pre-petition claims in the bankruptcy to the extent those claims applied to product sales to the operations that were purchased by Anixter.
Due to the higher purchase price paid as a result of the active bidding process, Anixter now expects that if it purchases any valid pre-petition claims, the aggregate amount of such purchased claims will be substantially less than was originally contemplated. To the extent any such claims are purchased by Anixter, it will result in a charge to earnings for the difference between the purchase price of the claims and the proceeds, if any, from the settlement of those claims in the bankruptcy process.
Given the limited amount of claims, if any, which the company now anticipates purchasing, the charge to earnings will not be material. Excluding any charge associated with the purchase of pre-petition claims, Anixter expects this acquisition to be nominally accretive to earnings beginning in the third quarter of 2004.
'This acquisition is an important step in our continuing strategy of building a global OEM supply business,' said Robert W. Grubbs, president and CEO of Anixter. 'Benefits of the acquisition include the addition of an excellent team of people, a number of blue chip customers and new geographic locations that will complement our previous acquisitions of Pentacon and the Walters Hexagon Group.
'We anticipate this acquisition will add approximately $65 million per year to our pre-acquisition $325 million annual base of fastener and other small component OEM supply business. With this combined volume, a coast to coast presence in the United States and a strong presence in the United Kingdom, we believe we are now in an excellent position to pursue organic growth with multi-national OEMs. For those OEMs who are looking to streamline their procurement processes and improve supply chain efficiency on a national or international scale our 1,000 plus employees in 44 dedicated facilities provide a sound alternative to the many local and regional suppliers in this business,' Grubbs said.
'The bankruptcy process worked as expected by providing the seller an opportunity to maximize the proceeds from the sale. Our total outlay for the purchase does not materially change from what was contemplated, rather the mix changes between the assets and operations purchased and the purchase of pre-petition claims.