WWT Acquires Softchoice: Expanding IT Solutions Globally

Significant Acquisition Concludes 2024

A substantial business transaction finalized a noteworthy 2024. World Wide Technology (WWT), a technology services firm headquartered in St. Louis, revealed on Tuesday an agreement to purchase Softchoice, a Canadian IT solutions provider, in a deal estimated at $1.8 billion CAD, which translates to approximately $1.25 billion USD.

Deal Details and Approvals

This acquisition will be executed entirely in cash. The board of directors at Softchoice has given unanimous approval to the deal. However, shareholder approval is still pending. Finalization is also contingent upon court validation and the fulfillment of standard closing requirements, with an anticipated completion date in late Q1 or early Q2 of 2025.

Should the agreement fail to materialize, Softchoice may incur a termination fee of $49 million CAD (roughly $34 million USD). The board retains the option to evaluate alternative proposals during this period.

Strategic Rationale for the Acquisition

Jim Kavanaugh, co-founder and CEO of WWT, articulated that Softchoice’s expertise in software, cloud technologies, cybersecurity, and artificial intelligence will enhance WWT’s current offerings.

He stated, “Softchoice has consistently demonstrated its impact within the IT sector for over 35 years,” and further emphasized that “this acquisition will empower us to deliver increased value to clients pursuing their digital transformation objectives.”

Softchoice’s History and Growth

Established in 1989 by David Holgate and Jone Panavas, Softchoice initially focused on providing specialized software to large enterprise clients. Over time, the company has expanded its capabilities and now stands as a leading provider of technology solutions and services across North America, as indicated on their official website.

In 2013, Birch Hill, a private equity firm, acquired Softchoice for C$412 million (~$286 million USD), according to Crunchbase data. Approximately eight years later, in 2021, the company initiated an initial public offering on the Toronto Stock Exchange (TSX), achieving a valuation of around C$1.15 billion (~$800 million USD).

Recent Financial Performance

Softchoice has exhibited robust financial results recently. During Q3 2024, the company reported a 10% year-over-year increase in gross profit and an 8% rise in net income, fueled by a growing customer base. Adjusted EBITDA reached $23.2 million for the quarter, representing a 2.2% increase compared to Q3 2023.

Shareholder Value and Delisting

WWT asserts that its offer provides a total shareholder return of approximately 62% based on Softchoice’s initial public offering price. If the acquisition is completed, Softchoice’s stock will be delisted from the TSX.

Andrew Caprara, president and CEO of Softchoice, expressed enthusiasm about the merger, stating, “We are excited to join WWT.” He highlighted WWT’s extensive scale, global reach, substantial customer base, and leading infrastructure solutions as complementary to Softchoice’s software and cloud-focused offerings, its Canadian presence, and its strength in the North American mid-market.

WWT’s Background and Previous Acquisitions

Founded in 1990 by Kavanaugh and David Steward, WWT assists clients and partners in the design, testing, and implementation of technology solutions, encompassing cloud computing, data center infrastructure, and application development. The company generates approximately $20 billion in annual revenue and employs over 10,000 individuals.

This marks WWT’s third acquisition to date. Previously, WWT acquired Performance Technology Group, based in Baltimore, Maryland, in 2010, and software company Asynchrony in 2015.