Synnex Sells Off Contract Assembly Assets

The transaction includes the sale of certain inventories and customer contracts, primarily for customers now being served by both Synnex and Mitac. Synnex will provide transition services to Mitac for a fee over the next several quarters, according to Kevin Murai, Synnex president and CEO.

“As we sharpen our focus on our core data center and distribution value-add assembly operations, it is only fitting to turn these direct relationships and their respective direct customer interface aspects back to Mitac,” Murai said in a statement.

Synnex is not exiting the assembly services business entirely, he said, and the company plans to invest in that area of the market for vendors that also utilize Synnex’s data center and distribution capabilities.

Revenue from the assembly contracts being sold to Mitac accounted for close to $375 million in the 12-month period ended May 31, according to Synnex.

Synnex shares were trading at $25.67, down 27 cents, or 1 percent, following the announcement.

Reached Monday afternoon, Synnex CEO Kevin Murai said Mitac retains about a 30 percent share in Synnex, down from a more sizable position when the company went public in 2003.

“They’ve been systematically selling their position, but they are a shareholder in the company and we do partner with them from a manufacturing standpoint,” Murai said. Mitac did not receive any preferential treatment regarding the sale of the assembly contracts, Murai said.

“We do our diligence on any buy-sell transaction. We don’t treat Mitac any differently because they’re an investor,” he said.

Murai added that Synnex still has a robust contract assembly business. The only difference now is customers who also dealt with Mitac only have to deal with one company, not two, he said.

“The [contracts sold] were heavily engaged with Mitac. Within our configuration and design business, we’re retaining what is more synergistic with the Synnex distribution business,” he said. This article was updated July 19, 2010.