IN THE SPIRIT OF APRIL FOOLS’ DAY:
Arrow was founded as a stand-alone Manhattan electronics store in 1935. After expanding to become a successful franchise, the company gradually grew to become a powerhouse business-to-business electronics distributor. Now one of the largest component companies in the world, Arrow brought in an astounding $29.68 billion in revenue in 2018.
Similarly, Avnet also began its life in New York City, but as a retailer of surplus radio parts in 1921. In the post-World War II era, the firm moved into electronics distribution and became Intel’s first distributor. In the last decade, the company has aggressively expanded its market share with a series of multibillion-dollar acquisitions.
Arrow’s purchase of long-term rival Avnet took analysts by surprise for a few different reasons.
One, Avnet’s $6.54 billion market cap makes it a bigger company than the $4.70 billion valued Arrow. Two, Avnet finished 2018 with earnings of -$156.42 billion against $19.04 billion in revenue. Three, the highly unusual acquisition terms the two companies agreed upon.
By the end of April, Arrow will own 100 percent of Avnet for 55,000,000 ethers, the currency unit of popular digital asset platform Ethereum, barring shareholder approval. At present exchange rates, the deal is worth $7.82 billion, meaning Arrow’s acquiring its rival for just under 20 percent over market value.
Avnet’s Interest in Cryptocurrency (Did we mention: April Fools’ Day)
Earlier this month, Avnet made a deal with leading blockchain payment provider Bitpay to begin accepting cryptocurrency payments.
Sunny Trinh, Avnet’s vice president of demand creation, said the partnership would help the company better serve its clients. “We’re working with BitPay to facilitate secure blockchain payments for all types of customers so they can focus on developing their products, not how to pay for them.”
Similarly, Avnet framed its decision to make the biggest acquisition in its history via digital currency as an embrace of the modern marketplace.
“These days, people use cryptocurrency to buy everything from sandwiches to massive quantities of LSD. So we figured why not a semiconductor company? I had the $8 billion we got from JP Morgan converted to ethers.” said Avnet CEO William Amelio.
(Really…April Fools’ Day) Cryptocurrency Insecurity
There may be one major hang up with Arrow-Avnet deal. Like other cryptocurrency platforms, Ethereum has struggled with data breaches.
In 2016, a hacker exploited a software vulnerability in the platform to siphon away $50 million worth of ethers. Moreover, Canadian cryptocurrency exchange QuadrigaCX lost access to $190 billion after its CEO died unexpectedly in January.
When told about the extreme volatility of the digital asset market by the Burn-In, Amelio seemed unsettled. “Huh. Didn’t know about any of that. Hmmm,” muttered Amelio. “Well, the cryptocurrency sector is much more secure than it was three months ago.”
Update: Earlier Monday morning, Vitalik Buterin, co-founder of Ethereum, announced that a coordinated hack resulted in the exchange losing all of its assets. However, he expressed confidence that his team can reverse the transfer.
Update 2: Following Ethereum’s announcement, Avnet revealed the Arrow acquisition was off and that Amelio had been terminated effective immediately. When asked for comment about his firing, Amelio replied: “Well, that’s the end of me.”
Update 3: Tesla CEO Elon Musk took to Twitter to say he had acquired Ethereum’s assets and would use them to take his company private on April 20.
Update 4: The Securities Exchange Commission retweeted Musk’s Ethereum post with a link to a new court filing charging the executive with making yet another misleading claim. The agency’s retweet also included the statement reading, “Some CEOs are always trying to ice skate uphill.”
Update 5: April Fools’ Day!