After a year of tightening its belt through layoffs, cost cuts and the sale of its MOCA division, beleaguered distributor Merisel Inc. Tuesday announced it will now shed its Canadian subsidiary.
Synnex Information Technologies Inc., a privately-owned distributor based in Fremont, Calif., said it will buy Merisel Canada Inc. for a reported $30 million U.S. in cash. The deal is expected to close in the next 30 to 60 days.
The highly competitive distribution market in Canada forced Merisel’s hand, according to U.S. chief Tim Jenson. “We didn’t feel we could compete well long term with the international presence and competitors like Ingram Micro and Tech Data, and felt it would be better if (Merisel Canada) also had an international focus,” he said.
El Segundo, Calif.-based Merisel moved out of the broad-line distribution business itself last December, concentrating its efforts on software licensing and e-services subsidiary Optisel Inc. The $30 million will be channeled into those businesses, added Jenson, and the company will consider future acquisitions “that may or may not be in related industries that would augment our growth.”
The company may have changed hands, but in the short term it will be business as usual for Toronto’s Merisel Canada, according to Synnex’s director of marketing Sandra Salah. There are no immediate plans to move or layoff staff, or to change strategic direction. “It will remain as is, status quo,” she said. “They’ve built a very fine organization, and we don’t want to disrupt that.” That is what Synnex is telling Merisel Canada resellers and customers to allay fears during the transition, said Salah. The Merisel name will eventually disappear, though, possibly replaced by Synnex Canada.
“We have had a desire to get into the Canadian market just as an overall plan of expanding our company on a global basis,” said Salah. “Prior to (Tuesday), we did not have a presence in Canada, and purchasing Merisel Canada allows us to very efficiently get into the Canadian market.”
The writing has been on the wall for some time, according to others in the Canadian high-tech distribution business. Jim Estill, president of EMJ Data Systems Ltd., called Tuesday’s announcement “the worst kept trade secret in the industry.”
“It had to happen. Merisel’s been for sale for quite some time,” said Rick Reid, president of Tech Data Canada Inc. He said that Merisel had been shopped around to Tech Data Canada, but such a deal wouldn’t have made sense for a Canadian distributor. “There’s really no value in either Ingram Micro or Tech Data buying Merisel Canada. It’s all the same accounts and a lot of the same product lines. You’d only end up benefiting the distributor that didn’t buy (Merisel),” said Reid. “We always said it would have to be someone looking for expand who isn’t in Canada already.”
Estill said he may see some windfall business come his way due to Merisel changing hands. “Where there are changes, there are sometimes some opportunities for us. . . . If they do something to change the way they do business or drop a vendor line or treat customers differently, that always customers to re-evaluate. There’s a possibility I can pick up some of that business.” However, admitted Estill, “in the medium term, they might be a more formidable competitor.”
There is no indication as to the future of Merisel Canada and whether it will follow up on president Mitchell Martin’s promises of a new logistics and e-services business. Martin outlined his goals for 2001 in a memo to partners and customers issued last November. Martin could not be reached for comment at press time.