Acquisitions and divestitures

2013 Acquisitions

During fiscal 2013, the Company acquired 12 businesses with aggregate annualized revenue of approximately $1.18 billion for a total consideration of $308,951,000, which consisted of the following (in thousands):



Cash	$	297,484
Contingent consideration	11,467
Total	$	308,951

The contingent consideration arrangements stipulate the Company pay up to a maximum of approximately $22,150,000 of additional consideration to the former shareholders of the acquired businesses upon the achievement of certain operating results. The Company estimated the fair value of the contingent consideration using an income approach which is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC 820. The Company adjusts the contingent consideration periodically based on changes to the inputs used in the income approach and the accretion of interest associated with the discounted liability.

Cash paid for acquisitions during fiscal 2013 was $262,306,000, net of cash acquired and holdback reserves.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the respective acquisition dates (in thousands):



Cash	$	29,276
Accounts receivable, net	226,743
Inventory	91,791
Other current assets	33,689
Property, plant and equipment	25,311
Other assets	47,292
Total identifiable assets acquired	454,102

Current liabilities	(157,986		)
Long term debt	(66,367		)
Other long term liabilities	(45,640		)
Total liabilities assumed	(269,993		)
Net identifiable assets acquired	184,109
Goodwill	157,521
Bargain purchase recognized	(32,679		)
Net assets acquired	$	308,951

The $157,521,000 of goodwill was assigned to the Electronics Marketing and Technology Solutions reportable segments in the amounts of $62,039,000 and $95,482,000, respectively. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of the acquired businesses. The amount of goodwill that is expected to be deductible for income tax purposes is not significant. The Company periodically adjusts the value of goodwill to reflect changes that occur as a result of adjustments during the measurement period following the date of acquisition.

Included in "Other assets" in the above table is $35,248,000 of identifiable intangible assets (see Note 6) related to customer relationships.

The Company acquired accounts receivable, which were recorded at the estimated fair value amounts; however, adjustments to acquired amounts were not significant as book value approximated fair value due to the short nature of accounts receivables. The gross amount of accounts receivable acquired was $228,980,000 and the fair value recorded was $226,743,000, which is expected to be collected.

The Company recognized restructuring and integration charges, and transaction and other costs associated with the 2013 acquisitions, all of which were recognized in the consolidated statement of operations and are described further in Note 17.

Supplemental information on an unaudited pro forma basis, as if the acquisitions had been consummated as of July 3, 2011, is presented as follows:



	Pro Forma Results For Years Ended
	June 29, 2013		June 30, 2012
	(Thousands)
Sales	$	25,771,000	$	26,872,000
Net income	$	454,000	$	587,000

With respect to the businesses acquired during fiscal 2013, the Company is unable to determine the amount of revenue and earnings of each business subsequent to their respective acquisition dates as each business has been integrated with Company entities and operations.

Internix, Inc., a company publicly traded on the Tokyo Stock Exchange, was acquired in the first quarter of fiscal 2013 through a tender offer. After assessing the assets acquired and liabilities assumed, the consideration paid was below book value even though the price paid per share represented a premium to the trading levels at that time. During fiscal 2013, the Company recognized a total gain on bargain purchase related to Internix of $32,679,000 pre- and after tax and $0.23 per share on a diluted basis (inclusive of adjustments occurring subsequent to the acquisition date).

In addition to the acquisitions described above, during fiscal 2013, the Company acquired the remaining non-controlling interest in a consolidated subsidiary for a purchase price that was less than its carrying value. The Company has reflected the difference between the purchase price and the carrying value of the non-controlling interest as additional paid-in capital in the accompanying consolidated statement of shareholders' equity for fiscal 2013.

2012 Acquisitions

During fiscal 2012, the Company acquired 11 businesses for total consideration of $413,585,000, which consisted of the following (in thousands):



Cash	$	390,410
Contingent consideration	23,175
Total	$	413,585

The contingent consideration arrangements stipulate the Company pay up to a maximum of approximately $124,419,000 of additional consideration to the former shareholders of the acquired businesses upon the achievement of certain operating results. The Company estimated the fair value of the contingent consideration using an income approach which is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC 820. The Company adjusts the contingent consideration periodically based on changes to the inputs used in the income approach and the accretion of interest associated with the discounted liability. During fiscal 2013, the Company reversed an earn-out liability related to a 2012 acquisition for which payment is no longer expected to be incurred and recorded a charge of $11,172,000 that is included in "Restructuring, integration and other charges" in the accompanying consolidated statement of operations.

Cash paid for acquisitions during fiscal 2012 was $313,218,000, net of cash acquired and holdback reserves.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the respective acquisition dates (in thousands):



Cash	$	75,016
Accounts receivable, net	132,195
Inventory	59,463
Other current assets	23,936
Property, plant and equipment	9,729
Other assets	104,368
Total identifiable assets acquired	404,707

Current liabilities	(230,747		)
Other long term liabilities	(2,483		)
Total liabilities assumed	(233,230		)
Net identifiable assets acquired	171,477
Goodwill	246,425
Bargain purchase recognized	(4,317		)
Net assets acquired	$	413,585

The $246,425,000 of goodwill was assigned to the Electronics Marketing and Technology Solutions reportable segments in the amounts of $179,989,000 and $66,436,000, respectively. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of the acquired businesses. The amount of goodwill that is expected to be deductible for income tax purposes is not significant. The Company periodically adjusts the value of goodwill to reflect changes that occur as a result of adjustments during the measurement period following the date of acquisition.

Included in "Other assets" in the above table is $93,291,000 of identifiable intangible assets (see Note 6).

The Company acquired accounts receivable, which were recorded at the estimated fair value amounts; however, adjustments to acquired amounts were not significant as book value approximated fair value due to the short nature of accounts receivables. The gross amount of accounts receivable acquired was $134,337,000 and the fair value recorded was $132,195,000.

The Company recognized restructuring and integration charges, and transaction and other costs associated with the 2012 acquisitions, all of which were recognized in the consolidated statement of operations and are described further in Note 17.

Supplemental information on an unaudited pro forma basis, as if the acquisitions had been consummated as of July 4, 2010, is presented as follows:



	Pro Forma Results For Years Ended
	June 30, 2012		July 2, 2011
	(Thousands)
Sales	$	26,052,000	$	27,404,000
Net income	$	568,000	$	700,300

With respect to the businesses acquired during fiscal 2012, the Company is unable to determine the amount of revenue and earnings of each business subsequent to their respective acquisition dates as each business has been integrated with Company entities and operations.

Unidux Electronic Limited, a Singapore publicly traded company, was acquired in January 2012 through a tender offer. After assessing the assets acquired and liabilities assumed, the consideration paid was below book value even though the price paid per share represented a premium to the trading levels at that time. Accordingly, the Company recognized a gain on bargain purchase of $4,317,000 pre- and after tax and $0.03 per share on a diluted basis.

2011 Acquisitions

The Bell Microproducts Inc. ("Bell") and Unidux, Inc. ("Unidux") acquisitions and purchase price are described further below. The remaining acquisitions completed during fiscal 2011 were acquired for an aggregate purchase price of $124,678,000 net of cash acquired. Pro forma financial information is not presented for fiscal 2011 as the Bell acquisition occurred on July 6, 2010, which was three days after the beginning of the Company's fiscal 2011, and the revenue and earnings of the remaining acquisitions are not significant to the consolidated results of operations of the Company.

The Company recognized restructuring and integration charges, and transaction and other costs associated with the 2011 acquisitions, all of which were recognized in the consolidated statement of operations and are described further in Note 17.

Unidux

Unidux, a Japanese publicly traded company, was acquired through a tender offer. At the time of the Company's acquisition of Unidux, Unidux's shares were trading below its book value. The Company offered a purchase price per share for Unidux that was above the prevailing trading price thereby representing a premium to the then recent trading levels. Even though the purchase price was below book value, Unidux shareholders tendered their shares. As a result, the Company acquired Unidux net assets excluding cash of $163,770,000 for a purchase price of $132,780,000, net of cash acquired, and recognized a gain on bargain purchase of $30,990,000 pre- and after tax and $0.20 per share on a diluted basis. Prior to recognizing the gain, the Company reassessed the assets acquired and liabilities assumed in the acquisition.

Bell

On July 6, 2010, the Company completed its acquisition of Bell, a value-added distributor of storage and server products and solutions and computer components products, providing integration and support services to OEMs, VARs, system builders and end users in the U.S., Canada, EMEA and Latin America. The consideration for the transaction totaled $255,691,000, which consisted of $7.00 in cash for each share of Bell common stock outstanding, cash payment for Bell equity awards, and cash payments required under existing Bell change of control agreements, plus the assumption of $323,321,000 of Bell net debt. Of the debt acquired, the Company repaid approximately $209,651,000 of debt (including associated fees) immediately after closing.

Divestitures

During fiscal 2013, the Company divested a small business in TS Asia for which it recognized a loss of $1,667,000 pre-tax, $1,704,000 after tax and $0.01 per share on a diluted basis, which was reflected in "Gain on bargain purchase and other."

Included in the cash flows from investing activities for fiscal 2013 were proceeds of $3,613,000, net of cash divested, related to the divestiture that occurred during fiscal 2013 and the receipt of an earn-out payment associated with a divestiture completed in the prior fiscal year, for which there was no gain or loss as the proceeds were applied against the earn-out receivable that was established at the time of sale.

During fiscal 2012, the Company recognized a loss of $1,399,000 pre-tax, $854,000 after tax and $0.01 per diluted share included in "Gain on bargain purchase and other" in the consolidated statements of operations related to a write-down of an investment in a small technology company and the write-off of certain deferred financing costs associated with the early termination of a credit facility.

During fiscal 2011, the Company completed the divestiture of New ProSys Corp. (“ProSys”), a value-added reseller and provider of IT infrastructure solutions. Avnet acquired ProSys as part of the Bell acquisition. Total consideration included a cash payment at closing, a short-term receivable and a three-year earn-out based upon ProSys’ anticipated results. As a result of the divestiture, the Company received cash proceeds of $19,108,000 and wrote off goodwill associated with the ProSys business. No gain or loss was recorded as a result of the divestiture.

Also during fiscal 2011, the Company recognized a loss of $6,308,000 pre-tax, $3,857,000 after tax and $0.02 per share on a diluted basis included in “Gain on bargain purchase and other” related to the write-down of prior investments in smaller technology start-up companies (see Note 5 for other amounts included in “Gain on bargain purchase and other”).