PC Connection, Inc., a direct marketer of information technology products, will acquire MoreDirect, Inc. for roughly $21 million in cash and contingency payments, the firms announced today.
MoreDirect, which sells computer products to companies and the government via the Internet, will distribute roughly $9 million in previously taxed earnings to shareholders prior to the closing.
In addition, PC Connection will place $10 million in escrow to cover a portion of the contingency payments. That will be paid out in one installment if MoreDirect maintains EBID of $22 million in aggregate during the calendar years of 2002 and 2003.
In a related development, PC Connection said it expects its first-quarter sales to hit from $235 million to $240 million. However, the company also predicted a loss before special charges.
MoreDirect reported net sales of $219 million for 2001, and net income of $9.2 million.
The acquisition, which is expected to close within 30 days, will provide MoreDirect with access to “additional capital, marketing programs and other resources,” said president Russell Madris in a statement.
The firm retain its trade name, and will continue operating from its facilities in Boca Raton, FL.
PC Connection, based in Merrimack, NH, said that its commercial sales have been flat. The company expects its federal government business to increase by 10% during the second quarter, compared with the first quarter of 2001. However, that business will decrease by $32 million from unusually high sales in the fourth quarter.
CEO Ken Koppel said in a statement that the firm is “disappointed with our project results for the quarter.” However, he added, “We are encouraged that the commercial business has stabilized.”
MoreDirect offers more than 350,000 technology products from the inventories of wholesale distributors and manufacturers. PC Conenction offers products through two subsidiaries: PC Connection Sales Corp., Merrimack, NH, and GovConnection, Inc., Rockville, MD.
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