Insight Enterprises Inc, the Tempe, Arizona-based computer direct marketer, has pulled out of a $135.3m takeover of Action Computer Supplies Holdings Plc, blaming of the recent financial performance of the UK-based distributor. Action shares instantly crashed 55% to 80 pence as InsightÆs sudden withdrawal from the deal cast a shadow over the future of the Wembley, Middlesex company.
The merger was first announced in May (CI No 3,658) when Insight was prepared to offer $150m but the price was renegotiated downwards in July as a result of weaker operating results recently experienced by Action. Insight president Tim Crown then insisted that Action was key to its further expansion into Europe. ActionÆs weak sales performance he said, reflected temporary market conditions relating to a Y2K slowdown in spending and changes Action had made to its infrastructure to position it for future growth.
Action chairman Henry Lewis now says the effects of recent short-term weakness in the UK IT market should not have outweighed the strategic benefits of the merger. His statement made it clear that Insight was not willing to further renegotiate the merger agreement.
The transatlantic link-up was designed to create a global direct marketer of brand name IT products with combined revenue of $1.6bn and a common customer base in the SME market. InsightÆs withdrawal leaves Action vulnerable to a bid from one of InsightÆs competitors.
Action released preliminary figures showing it expects to make net profit of 1.2m pounds ($2m) in the year to August 30, down from profit of 4.1m pounds ($6.8m) on revenue 10.8% higher at 276.6m pounds ($461.9m).
