CDW to Acquire Sirius Computer Solutions for $2.5B

IT firm CDW Corp. (CDW) has signed an agreement to acquire Texas-based IT solutions and services provider Sirius Computer Solutions, Inc. for $2.5 billion in cash. CDW will acquire Sirius from an affiliate of New York-based equity firm Clayton, Dubilier & Rice.

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Following the news, shares of CDW closed 4.8% higher on Monday at $186.23.

CDW’s technology offerings include mobility, security, data center optimization, cloud computing, virtualization and collaboration. (See Insiders’ Hot Stocks on TipRanks)

Sirius generated net sales of $2.04 billion in 2020. It boasts of nearly 3,900 large and mid-sized customers. Its product portfolio includes cloud and managed services, digital and data innovation, security, and hybrid infrastructure.

The President and CEO of CDW, Christine A. Leahy, said, “Combining our businesses will accelerate progress on our three-part growth strategy by augmenting our portfolio and enhancing our ability to deliver customer-centric outcomes across the full technology solutions stack and lifecycle.”

The company expects the transaction to boost its solutions and services capabilities significantly and improve its ability to solve customers’ technology challenges. CDW anticipates the combined services portfolio to generate annual net sales of $1.3 billion, up from nearly $900 million in 2020.

Furthermore, the acquisition is expected to add $0.62 to CDW’s adjusted earnings per share (EPS) on a combined 2020 basis. It is also likely to increase the company’s adjusted operating income margin by around 20 basis points and gross margin by almost 110 basis points.

The acquisition is expected to close in December.

Following the announcement, Stifel Nicolaus analyst Matthew Sheerin reiterated a Hold rating on the stock with a price target of $190 (2% upside potential).

The analyst said, “Sirius is the latest of several service-related acquisitions CDW has made in the last three years, and that breadth of skill sets further positions the company to continue to gain share from smaller competitors.”

Overall, the stock has a Moderate Buy consensus rating based on 2 Buys and 3 Holds. The average CDW price target of $198.20 implies 6.4% upside potential. Shares have gained 46.5% year-to-date.