An Arizona company is buying Eden Prairie-based Datalink for $258 million.
Insight Enterprises, based in Tempe, has agreed to pay $11.25 per share to Datalink shareholders. The offering price is a 19 percent premium to Datalink's closing price on Friday. Net of cash and debt acquired in the deal is valued at $196 million.
Datalink provides data center services and solutions. It has 35 offices in the U.S. and 570 employees. In 2015, the company had $765 million in annual revenue and made profits of $4.7 million, or 21 cents per share. In addition to the merger announcement Monday morning Datalink also released its third-quarter results after the market closed in the afternoon.
"The data center is at the core of our clients' strategic investments," said Insight CEO Ken Lamneck in a news release. "The acquisition of Datalink is a significant step in strengthening the foundation of our data center practice as we add the expertise and depth of the Datalink team to our portfolio."
Publicly traded Insight Enterprises designs and implements information technology solutions for business, government, health care and education clients. In 2015, it had annual revenue of $5.4 billion and profits of $75.9 million. "Our decision to join forces with Insight is based on our shared commitment to deliver best-in-class technology, operations and services to meet our clients' need for IT transformation," said Datalink CEO Paul Lidsky in a statement.
In a note to employees and shareholders on its website, Lamneck wrote that the intention was to keep Datalink "generally intact." However, in the news release announcing the deal, Insight stated it expects to save $20 million in costs over the next two years from corporate efficiencies, duplicate functions and IT systems integration.
Eric Martinuzzi, an analyst at Lake Street Capital Markets in Minneapolis, reviewed the deal and believes Insight's addition of Datalink's data center practice to its distribution business increases its ability to compete with CDW Corp., an industry leader. He doesn't believe Datalink will receive a higher offer.
Datalink's third-quarter results were reported after the market closed on Monday. Sales for the quarter ended Sept. 30 were $184 million, a 7 percent decrease from the third quarter last year. The company earned a profit of $546,000, or 3 cents per share, down from $1.3 million, or 6 cents per share in the same quarter last year.
Revenue and earnings for the quarter were down due to discontinued operations.
Non-GAAP net earnings, which exclude the discontinued operations, would have been $2.6 million, or 12 cents per share, down from $3.3 million, or 15 cents per share in same quarter last year.
Results were down due to discontinued operations. Excluding those operations, earnings would have been $2.6 million, or 12 cents per share, down from $3.3 million, or 15 cents per share, in same quarter last year.
The deal, which requires shareholder approval, is expected to close in the first quarter of 2017. Datalink's stock closed Monday up 18 percent to $11.14 a share. Shares of Insight rose nearly 2 percent to $28.68.