WESCO International, Inc., (NYSE: WCC), has announced that, based on current market conditions, it has revised its expectations with respect to the financing of the cash portion of the consideration payable pursuant to the previously announced merger agreement with Anixter International Inc. The company also provided information about WESCO’s participation in the J.P. Morgan Industrials Conference on Wednesday, March 11, 2020.
Based on current market conditions, WESCO expects to fund the entirety of the cash portion of the merger consideration with debt and cash-on-hand at WESCO and Anixter. WESCO previously anticipated funding a portion of the cash consideration through the issuance of WESCO common stock or other equity or equity-linked securities, in addition to issuing debt.
“Given current market conditions, we are adjusting our financing plan for the cash portion of the Anixter merger consideration. Costs of issuing equity and debt have materially changed since we announced the transaction in January,” said WESCO Chairman, President, and Chief Executive Officer, John Engel. “Our equity is the most valuable component of our capital structure and we are unwilling to use it as a source of financing at the current market value. Issuing debt instead of equity adds approximately one-half turn to our expected leverage at closing. We expect the outstanding cash flow generation of the combined company to service the higher level of debt while retaining our flexibility to invest in the business and de-lever to within our target leverage range within three years.”
The merger agreement, which is unchanged, provides for each share of Anixter common stock to be converted into the right to receive $70.00 in cash (which amount may be increased by up to $2.82 per Anixter common share at closing, based on the volume-weighted average trading price of WESCO common stock on the NYSE during a specified period prior to closing, as described in greater detail in WESCO’s Registration Statement on Form S-4 in connection with the merger), 0.2397 shares of WESCO common stock and preferred stock consideration valued at $15.89, based on the value of its liquidation preference. Investors should review the Registration Statement on Form S-4, as amended, for a more complete description of the merger consideration.