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Warren Buffett made rival bid for Tech Data, report says

CNBC reports that billionaire Warren Buffett’s Berkshire Hathaway made a play for the Largo-based technology distribution company, but was outbid by Apollo Global Management.
Warren Buffett's Berkshire Hathaway reportedly bid $140 per share for Tech Data, but it was not enough. (Times file)
Warren Buffett's Berkshire Hathaway reportedly bid $140 per share for Tech Data, but it was not enough. (Times file)
Published Nov. 29, 2019
Updated Nov. 29, 2019

LARGO — Billionaire investor Warren Buffett made the second bid that drove the purchase price for Tech Data up to $6 billion, CNBC reported Friday.

Buffett’s investment company, Berkshire Hathaway, reportedly bid $140 per share of Tech Data’s stock on Nov. 23, more than the $130 per share originally offered by New York private equity firm Apollo Global Management.

CNBC said the bid came after Berkshire Hathaway vice chairman Greg Abel traveled to Largo last week to meet with Tech Data executives. Buffett’s company used Apollo’s contract as a template for its own offer, tweaking a few parts on terms that were favorable to Tech Data, according to CNBC.

Tech Data’s board voted to recognize Buffett’s offer as superior to Apollo’s, leading Apollo to raise its offer to $145 per share. Tech Data accepted the new terms on Wednesday.

RELATED: Rival bid drives price for Tech Data to $6 billion

At that, Buffett, a bargain hunter not known for letting emotion overrule his financial analysis, dropped out, according to CNBC.

“Buffett said he does not intend to make a higher offer,” CNBC reported. Berkshire Hathaway’s chief financial officer did not respond to a request for comment Friday. A Tech Data spokesman said the company had no comment on the report.

In a letter to employees made public Friday, Tech Data CEO Rich Hume said the deal with Apollo is expected to close in the first half of 2020, that the company will remain headquartered in Pinellas County, where it employs about 2,000 people, that its management team will stay in place and that it will keep its name as a private company instead of as a publicly traded one.

“It is a compliment to all of you that two different bidders were trying to acquire Tech Data,” Hume said. “Clearly, these proposals are an acknowledgment of what we have achieved and how we have successfully positioned our company for long-term growth.”

Meanwhile, it didn’t take long for Tech Data’s stock price to catch up to and even test the new dynamics of the company’s proposed $6 billion sale to Apollo.

Tech Data stock closed Friday at $144.89 per share, up more than 12 percent from its pre-Thanksgiving close and a shade under Apollo’s new offer of $145 per share. In after-hours trading Friday, it topped the new offering price by reaching $145.30 per share.

“We thought from the beginning that $130 was too low and undervalued the shares,” Northcoast Research analyst Keith Housum, who follows Tech Data, said in an email to the Tampa Bay Times after news of the second bid broke over the holiday.

Under its merger agreement with Apollo, Tech Data has what’s known as a “go-shop” period that lasts through Dec. 9 to seek and consider competing purchase offers. If it accepts a better offer before Dec. 10, then it can get out of its agreement with Apollo by paying the New York-based private equity firm a termination fee of $89.5 million.

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If Tech Data terminates the agreement after that, it would owe Apollo $184 million, according to terms of the merger.

If Apollo fails to consummate the deal, then it has agreed to pay Tech Data a termination fee of nearly $316 million.

Any other competing offers would have to be at least $148 per share, Housum said, and they would need to come in quick to beat the Dec. 9 deadline.

“With a little over a week to go, we are probably at the end point,” he said. “But I would not be shocked if there was one more offer out there in that $150 to $155 range. It’s not over 'til the fat lady sings.”

Berkshire Hathaway at a glance

CEO: Warren E. Buffett, 89

Headquarters: Omaha, Neb.

The business: It would be hard to look into a corner of the U.S. economy and not find Berkshire Hathaway somewhere. The company is a major player in insurance and reinsurance through companies that include GEICO. Its businesses also include companies in freight rail transportation, utilities, energy generation and distribution, manufacturing of industrial, building and consumer products, automotive sales and real estate brokerage. It has a large stock portfolio. Its five largest holdings at the end of 2018 consisted of stakes of 5 to nearly 18 percent in American Express, Apple, Bank of America, Coca-Cola and Wells Fargo. Berkshire and its consolidated subsidiaries employ about 389,000 people worldwide.

Revenues, 2018: $248 billion.

Total assets, 2018: $708 billion.

Source: Berkshire Hathaway 2018 Annual Report