China’s HNA Group Bolsters Logistics Arm with $6 Billion Ingram Micro Acquisition
Chinese logistics firm Tianjin Tianhai in one fell swoop has reshaped the technology landscape with plans to acquire Ingram Micro, the No. 1 technology distributor, for $6 billion.
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Ingram Micro, the $46 billion distribution powerhouse will be folded into $29 billion HNA Group, creating a global conglomerate with more capital to fuel both organic growth as well as mergers and acquisitions.
Ingram Micro said the deal will expand its geographic reach and add more capabilities around high-value IT solutions, mobility lifecycle services, cloud, and commerce and fulfillment solutions. .
“As a part of HNA Group, we will have the ability to accelerate strategic investment, as we continue to capitalize on the constant evolution of technology and emerging trends by adding expertise, capabilities and geographic reach,” Alain Monié, CEO of the Irvine, Calif.-based distributor, said in a statement yesterday.
Solution providers who work with Ingram Micro urged the company to stay focused on its commitment to delivering top-level services to the channel.
Sam Haffar, CEO of Houston-based Computex Technology Solutions, No. 130 on the CRN 2015 Solution Provider 500, said the distribution behemoth needs to “stay the course,” maintaining the same high level of services for partners.
“Ingram has been a great partner for Computex for 28 years,” said Haffar. “They need to stay the course. They have to make sure they keep the same level of service and consistency that has made them a leader. They need to stay focused on being the best. If the people running the ship continue to run the ship the same way everything will be okay.”
The new Chinese conglomerate may even bring new benefits to partners, said Haffar. “There could be significant advantages,” he said. “That remains to be seen. We’ll continually assess what this means and what this new relationship will bring to us.”
Haffar’s advice to Ingram executives: “Keep doing what has made you great. If things start slipping the competition will come knocking. It’s that simple.”
The acquisition is expected to close in the second half of 2016 and will provide Ingram Micro shareholders with a 39 percent premium over the average closing share price in the month prior to the acquisition. Ingram Micro’s stock soared by 23.6 percent in after-hours trading Wednesday to $36.65 per share, approaching the $38.90 per share offered by HNA Group.
Both Ingram Micro and its U.S. partners have been pushing hard in recent years to expand their ability to sell outside of North America, said Dave DeCamillis, vice president of sales and marketing for Denver-based Platte River Networks, pointing to Ingram’s move to expand its Trust X Alliance elite partner program to the United Kingdom and South America in recent months.
“This could possibly pave the way for Asia, which would be pretty cool,” DeCamillis said.
Martin Wolf, president of martinwolf M&A Advisors of Walnut Creek, Calif., one of the top channel investment advisory deal makers, said the blockbuster deal has major implications for the global technology business.
“This is a big deal,” said Wolf. “Ingram is a great American company. What is interesting is it is being valued by this Chinese company as something much different than a distributor.
They are getting money out of China by buying a diversified company that trades essentially with the U.S. economy. Ingram shares have traded in a narrow range. What the Chinese get is essentially a beachhead into the U.S. Ingram is a global company in one of the most important markets: technology.”
Historically Ingram shares have traded at just 10 percent of sales, said Wolf. “This is a company that has traded in a narrow price range forever,” he said. “It has been a low value company based on how the market sizes its revenue.”
Wolf said he expects the U.S. government to approve the deal, but noted that it will be “interesting in this politically charged environment to see if the government raises questions. Ingram is a great company that blocks and tackles really well in an important segment.”
Wolf also cautioned that if Ingram makes significant changes competitors will pounce to grab solution providers away from the distribution giant. “To the extent they make changes even incrementally, their competitors will prosper.”
Ingram Micro will retain its name, brand, headquarters and management team following the merger, according to the company. HNA Group does not plan to close any Ingram Micro offices, facilities or warehouses, and very few, if any, layoffs are expected as part of the transaction.
HNA Group is a Haikou, China-based company with 180,000 employees, focused on transportation, tourism, logistics and financial services.
“Everybody is becoming more of a global company,” said Guy Baroan, president of Elmwood Park, N.J.-based Baroan Technologies. “Maybe this will open the door for Ingram to be even bigger in China.”
Paul Read, Ingram Micro’s president and COO, told investors in July that demand for U.S. vendors in China was “very slow” and “muted,” with the distributor struggling to rapidly grow its foothold in the country.
“We’re really working that business model to try and change the mix and change the offering there,” Read said at the time.
Ingram Micro has moved aggressively to expand its market share abroad, acquiring six South American or European companies or business lines since the start of 2015. Similarly, HNA Group has made three acquisitions worth a combined $10.9 billion since July.