Distribution giant SYNNEX plans to split into two separate publicly listed corporations.
Following completion of the restructuring in the second half of the year, the company’s distribution, logistics, and integration services units will be known as SYNNEX Technology Solutions. Concentrix, a customer experience (CX) services provider that is currently a wholly owned SYNNEX subsidiary, will do business under that same name as an independent business.†
SYNNEX President and CEO Dennis Polk will hold the same position with SYNNEX Technology Solutions. Chris Caldwell, who is currently president of Concentrix, will become president and CEO of the stand-alone company.
“Today, SYNNEX is taking affirmative steps to further drive shareholder value by announcing our plan to separate into two strong, independent, public companies,” said Polk in prepared remarks. “The spin-off will provide each company with sharper strategic and managerial focus and enable SYNNEX shareholders to own and value each business separately. We are very proud of our company and the returns we generated by investing in IT Distribution and CX Services over our nearly 40-year history. We are equally proud to have these two businesses reach a point where they are industry leaders and positioned well to be successful standalone public companies.”
The portions of SYNNEX soon to become SYNNEX Technology Solutions are currently responsible for roughly $19 billion in revenue annually. Even after its separation from Concentrix, the company says, it will be among the top three IT distributors in the Americas and Japan.
SYNNEX acquired Concentrix in 2006. The company generates approximately $4.7 billion in revenue at present and supports over 125 Fortune 2000 clients globally.
“With Concentrix achieving its current scale and efficiency ahead of expectations, coupled with the market opportunities ahead of us, the appropriate time to separate is now,” said Caldwell in a media statement. “The separation of the two businesses will enhance each company’s competitive position and accelerate significant value creation opportunities. I, along with the rest of the Concentrix team, are grateful for our time within the SYNNEX family and look forward to continuing the successful SYNNEX legacy.”
SYNNEX plans to operate on a “business as usual” basis until the separation process is complete. The transaction will not require a shareholder vote, the company says, but will be subject to “customary closing conditions,” including final approval by the board of directors and a Form-10 filing with the U.S. Securities and Exchange Commission.
The company believes the split qualifies as a tax-free transaction for income tax purposes, and confirmation of that assessment from the federal government is a third closing condition. How an unfavorable opinion from the IRS would affect the deal is unclear.
News of the SYNNEX split arrives on the same day the company posted results for the fourth quarter of its 2019 fiscal year. The future SYNNEX Technology Solutions recorded a 17.4% year-over-year revenue increase to $5.4 billion and a 3.1% uptick in operating income. Concentrix reported a 24.7% annualized revenue jump to $1.2 billion, which it credited primarily to the impact of its 2018 purchase of customer management services provider Convergys.
At SYNNEX’s Inspire partner conference last October, Polk trumpeted numbers like those as an opportunity for the company to accelerate growth in a time of mounting economic uncertainty.
“We really relish these kinds of times, because we think when there’s uncertainty we can really get more business, we can invest more in our company, and really grow our business overall,” he said during a keynote address. “We’re hiring a lot more people in our company. Where we can’t grow organically, we’re going to do M&A as well.”
In 2018, the most recent year for which figures are available, SYNNEX grew its U.S. SMB revenue 31%, thanks in significant part to rapidly climbing sales of cloud solutions generally and Microsoft Office 365 specifically.