WESCO Int'l (WCC) Improves Proposal to Acquire Anixter (AXE) to $93.50/Share in Cash and Stock

WESCO International, Inc. (NYSE: WCC) ("WESCO"), a leading provider of electrical, industrial, and communications MRO and OEM products, construction materials, advanced supply chain management and logistics services, confirmed today it has delivered to the Anixter International (NYSE: AXE) board of directors an improved proposal to acquire Anixter, a leading global distributor of Network & Security Solutions, Electrical & Electronic Solutions and Utility Power Solutions, for $93.50 per share in cash and stock.

The scale, earnings power and significant free cash flow of the combined business would accelerate growth and deliver increased shareholder value. This proposed transaction would bring together WESCO's and Anixter's diversified product offerings, broad customer relationships, extensive global footprint and service capabilities, and substantial intellectual and human capital to create a premier electrical and data communications distribution company. Together, WESCO and Anixter would be positioned to invest in digital transformation on a faster timeframe, benefit from growth and operational synergies, and accelerate the combined company's growth and profitability.

WESCO's proposal of $93.50 in cash and stock consists of the following:

• Consideration per Anixter share of $63.00 cash plus a fixed exchange ratio of 0.2397 shares of WESCO common stock plus $16.65 of a newly created class of WESCO perpetual preferred stock. Based on the closing price of WESCO's common stock on December 26, 2019, the total consideration represents $93.50 per share.
• Anixter stockholders would participate in all the value upside in the WESCO common stock. The common stock consideration would be subject to downside protection, such that if the average market value of WESCO common stock prior to closing is between $46.23 per share and $57.79 per share, then the cash consideration paid at closing would be increased by up to $2.77 per share to ensure that the total consideration remains at $93.50 per Anixter share.
• The perpetual preferred stock is expected to have a fixed market rate of approximately 9.25% (representing a spread of 325 bps over the prevailing unsecured notes to be issued to enact the transaction), subject to reset and a five-year non-call feature, and will be listed on the New York Stock Exchange.
• Together, the upfront consideration and Anixter stockholders' share of the capitalized synergies represents a significant value opportunity of over $100 per share for Anixter stockholders.
• Based on the number of shares of WESCO and Anixter common stock currently outstanding, it is anticipated that WESCO stockholders would own 84% and Anixter stockholders 16% of the combined company.

Mr. John J. Engel, WESCO's Chairman, President and Chief Executive Officer, commented, "This transaction would advance WESCO's strategic objective of becoming a leading service-focused global supply chain solutions company. With increased scale, complementary capabilities and industry-leading technologies, together, we would be ideally positioned to digitize our business, expand our extensive services portfolio and supply chain offerings, and deliver solutions to our customers whenever and wherever they need them. Importantly, stockholders of both companies would be able to participate in the substantial upside potential of the combined organization, including its enhanced strategic profile and competitiveness, as well as the significant expected synergies and earnings accretion.

"The scale, earnings power and significant free cash flow of the combined business would accelerate growth and deliver increased shareholder value. We also intend to quickly reduce leverage and be within our target range within 24 months post close. We strongly believe this transformative combination is in the best interests of both companies' stockholders and that our proposal represents a Superior Company Proposal compared to Anixter's current agreement with CD&R."

Compelling Strategic and Financial Rationale

• Enhances Scale and Global Position. The combined company would have significantly enhanced scale, with pro forma 2019E revenues of approximately $17 billion. WESCO would also have increased international exposure, with approximately 9% of revenues generated outside of the U.S. The increased scale would enable the combined company to invest in digital transformation and innovation on a faster timetable, and provide a platform for growth in attractive emerging markets.

• Broadens and Diversifies Product Portfolio. The combined company would have a comprehensive and balanced portfolio that brings together WESCO's capabilities in industrial, construction, utility and commercial, institutional, and government with Anixter's expertise in data communications, security, and wire and cable. Combining the companies' complementary products, services, and solutions is expected to create significant cross-selling and up-selling opportunities, strengthening the combined company's customer value proposition.

• Delivers Substantial Synergy Opportunity. WESCO expects to realize annualized run-rate cost synergies of greater than $200 million by the end of year-three through a reduction in corporate and regional overhead, including duplicative public company costs, branch and distribution center optimization, and efficiencies in procurement, field operations and supply chain. In addition, the combined company would be well-positioned to enhance growth by providing cross-selling opportunities of complementary product offerings to its expanded customer base.

• Provides Immediate and Significant Earnings Accretion. The combination is expected to be meaningfully accretive to WESCO's earnings on a standalone basis in the first full year of ownership, as well as result in significant earnings growth and margin expansion.

• Ability to Rapidly De-Lever. At closing, WESCO estimates that its pro forma leverage on a net debt to EBITDA basis would be approximately 4.5x. WESCO intends to utilize the strength of the combined company's cash flows, including significant synergies, to reduce its leverage quickly and ultimately intends to be within its long-term target leverage range of 2.0x – 3.5x within 24 months post-close.

WESCO Perspective on Clayton, Dubilier & Rice ("CD&R") Objectives

WESCO believes the combination creates tremendous value for WESCO and Anixter stockholders. CD&R clearly shares this view, which is reflected in CD&R's interest in owning and combining both companies.

CD&R's most recent agreement with Anixter provides $86.00 per share in cash at closing and $2.50 per share of contingent, capped upside from a potential combination with WESCO, in the form of a Contingent Value Right ("CVR"). The value of the CVR is highly speculative and the ability for Anixter stockholders to receive any value from the CVR is beyond CD&R's sole control. WESCO's proposal has no such contingency and provides $93.50 per share of value at closing and participation in substantial additional value upside, which is uncapped and is expected to deliver over $100 per share to Anixter stockholders as synergies are realized.

CD&R's approach to WESCO was an attempt to deprive WESCO and Anixter stockholders of the significant value creation opportunity from a combination, and to capture that value for CD&R's own benefit.

Mr. Engel continued, "WESCO has completed the requisite due diligence on a potential transaction and is prepared to immediately move forward with its proposed transaction. We urge the Anixter board of directors to accept our proposed transaction, and obtain the benefit of combining our companies for their stockholders."

Financing

The transaction is not subject to a financing condition. WESCO has obtained fully committed debt financing from Barclays for the cash portion of the transaction. WESCO intends to fund the required cash consideration with a combination of long‐term debt financing and additional equity or equity‐content securities.

Approvals and Timing to Close

The proposed transaction is subject to Anixter's board of directors, in consultation with its legal and financial advisors, determining that the WESCO proposal constitutes a "Superior Company Proposal" as defined in Anixter's previously announced merger agreement with CD&R. Anixter would then terminate the merger agreement with CD&R concurrently with the execution of the definitive agreement with WESCO, following expiration of CD&R's matching rights.

The WESCO transaction is subject to Anixter's stockholder approval, receipt of regulatory approval in the U.S. and certain foreign jurisdictions, as well as other customary closing conditions. WESCO anticipates the transaction could be completed in the summer of 2020.

Advisors

Barclays is serving as financial advisor to WESCO, and Wachtell, Lipton, Rosen & Katz is serving as legal advisor.

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