IT solutions firm Synnex Corp (NYSE: SNX) and IT distribution company Tech Data, owned by funds affiliated to Apollo Global Management Inc (NYSE: APO), inked a merger agreement to combine under a $7.2 billion deal.

What Happened: The combined company, with $57 billion in estimated pro forma annual revenues, would provide customers and vendors with expansive reach across products, services, and geographies to fast-track technology adoption.

"This transaction allows for accelerated revenue and earnings growth, an expanded global footprint, and the ability to drive significant operating improvements while continuing to create shareholder value," said Synnex CEO Dennis Polk.

The combined company would also benefit from significant financial strength to invest in its core growth platform, next-generation cybersecurity, cloud, data, and IoT technologies, which experienced explosive growth due to work from home and return to office trends per Tech Data CEO Rich Hume.

Apollo Funds would receive 44 million shares of Synnex, refinancing of existing Tech Data net debt, and redeemable preferred shares of $2.7 billion under the arrangement. Synnex shareholders would own 55% of the combined company, while Apollo Funds will own the remaining 45% under the deal. Rich Hume would lead the combined company as CEO. Dennis Polk would be the Executive Chair of the board.

Why It Matters: Apollo co-founder Marc Rowan became the CEO of Apollo as part of a planned succession process first announced in January 2021. Former SEC Chairman and Apollo's lead independent director Jay Clayton became the Non-Executive Chairman of the board. In these roles, Rowan and Clayton succeeded Apollo Founder Leon Black.

Synnex expects EPS accretion of over 25% in year one, with further accretion expected in year two. Net optimization and synergy benefits of $100 million are expected in the first year achieving a minimum of $200 million by the end of the second year.

Synnex cash balance stood at $1.4 billion as of February 28, 2021. Apollo's cash balance amounted to $1.6 billion as of December 31, 2020.

Price action: SNX traded higher by 6.66% at $110.07, and APO shares traded higher by 2.83% at $48.63 on the last check Monday.