ScanSource Announces Agreement to Acquire Brazil’s Leading Communications Distributor, Network1

ScanSource, Inc. (NASDAQ:SCSC), the leading international value-added distributor of specialty technology products, will expand its communications business in Latin America through its planned acquisition of Network1, Intersmart Comércio Importação Exportação de Equipamentos Eletrônicos, S.A. (“Network1”). Network1 is Brazil’s leading value-added distributor of communications equipment and services. As part of the transaction, ScanSource will be acquiring all of Network1’s operations throughout Latin America, including Brazil, Mexico, Colombia, Chile and Peru.

Network1 net sales for calendar year 2014 are estimated at approximately R$850 million (approximately US$374 million) with operating margins consistent with ScanSource’s Communications business. Network1 has demonstrated double-digit sales growth, which is projected to continue during the four-year earnout period. The acquisition is expected to be accretive to earnings per share and return on invested capital (ROIC) in the first year after closing, excluding one-time acquisition costs.

Founded in 2004 and headquartered in Sao Paulo, Brazil, Network1 has nearly 400 employees throughout Latin America. ScanSource is committed to becoming the leading value-added distributor of communications solutions for resellers in Latin America, and this acquisition represents an important step in this strategy. Network1 offers a broad portfolio of communications solutions, including unified communications and collaboration, networking and performance, data center and virtualization, cloud, logical security, infrastructure and physical security. The company carries a strong line of more than 65 vendor partners, including Avaya, Checkpoint, Dell, Extreme, F5, HP, Juniper, Polycom, Microsoft, Riverbed and Schneider-Electric.

“We entered the Brazilian Barcode and POS market in 2011 with the very successful acquisition of CDC Brasil, the region’s largest Barcode and POS value-added distributor,” said Mike Baur, CEO, ScanSource, Inc. “We have been looking for the right opportunity to complement and expand our successful Brazilian growth business with the addition of communications products in that geography. With Network1, we have found the right partner to cultivate and grow our value-added distribution business in Latin America. Rafael Paloni, Network1’s Chief Executive Officer, is a skilled leader who can help us leverage our existing operations in the area into new growth, not just in Brazil, but throughout the region.” Following the closing of the transaction, Mr. Paloni will lead ScanSource’s Communications business in Latin America.

The all-cash transaction includes an initial purchase price of approximately R$160 million (approximately US$70 million), plus earnout payments based on EBITDA over the next four years. The acquisition is subject to the completion of due diligence and regulatory approvals and is expected to close by the end of 2014. In the interim, business will continue as usual for both ScanSource and Network1 pending such regulatory approvals.

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