Ingram Micro Sold for $6 Billion to Tianjin Tianhai

Chinese shipping container transportation company Tianjin Tianhai Investment has purchased Ingram Micro (IM) for $6 billion, or $38.90 per share, in a surprise deal announced on Wednesday.

Ingram will operate as a subsidiary of Tianjin Tianhai following the completion of the deal, but the distributor will remain headquartered in Irvine, CA, according to the press release. The company’s executive leadership team will also remain in place, including Alain Monié, the company’s current CEO.

Wall Street responded positively to the acquisition, with Ingram Micro reporting that its shares rose 24 percent following the announcement. The purchase price of a single share also increased by about 31 percent, up from $29.65 on Wednesday, according to the company.

"While we’ve taken tremendous steps forward, we are far from finished in the Ingram Micro success story," said Monié, in a letter to Ingram's Global Associates. "In fact, the rest of the management team and I see more opportunity ahead than ever before. This is a key reason why we are excited about joining HNA Group as it helps us in the pursuit of our strategy and goals, which do not change, except we can get there faster."

Ingram’s acquisition is the latest in a series of large-scale acquisitions by Chinese companies meant to buoy slowing growth in the region, according to the Wall Street Journal.

HNA Group, a Hainan-based enterprise group with ties to aviation, tourism and logistics in China, is the largest stockholder in Tianjin Tianhai, according to Street Insider. Naturally, Ingram will become a part of HNA Group following the close of the deal, which is expected to take place sometime in the second half of 2016. Both Ingram Micro’s and Tianjin Tianhai’s board of directors have already approved of the deal.

Tianjin Tianhai Investment Company was formerly known as Tianjin Marine Shipping Company, and has previously been involved mostly in marine transportation services, according to Reuters.

San Francisco-based M&A Advisory company MartinWolf said the deal is bound to cause major disruption within the channel, and will serve as an opportunity for partners to renegotiate their agreements with the distributor for better purchasing and credit deals.

Tim Curran, CEO of the Global Technology Distribution Council, said the acquisition is significant, largely because of Ingram's widespread global market reach.

"Ingram Micro is a great company with an especially unique global profile, operating more than 120 distribution centers worldwide and serving customers in approximately 160 countries," said Curran, in an email. "We are a global industry association and view this development as yet another example of how distributors continue to grow, diversify and transform. The development reflects the value and importance of distribution in the overall technology marketplace."

It is surprising that Ingram Micro, which reported worldwide Q3 2015 sales of $10.5 billion and projected sales of up to 12.6 billion in Q4, would sell for only $6 billion, despite the fact that it is typically considered one of the largest IT distributors in the world. Compare the sale to the recent purchase of EMC by Dell for a whopping $67 billion, and the discrepancy becomes a little clearer.

“Whether or not this deal closes, the move is indicative of ongoing upheaval in the IT distribution space caused by technology’s shift to the cloud and the channel’s continuing march toward a services model,” said Carolyn April, CompTIA’s senior director of industry analysis, in an email.

The VAR Guy has reached out to Ingram Micro for additional comment on the acquisition, and will update this story once more information is disclosed.

Update: An Ingram Micro spokesperson responded to The VAR Guy's request for more information. Although company executives have so far been unavailable for comment, Ingram did send out several documents to shareholders with more information on the deal.

Here are some fast facts from Ingram Micro's Q&A document:

• Ingram said the acquisition is expected to help boost its reach into China and other emerging markets, thus providing new sales opportunities for vendor and customer partners. "As a part of HNA Group, Ingram Micro expects to have the ability to accelerate our investments, both organically and through M&A, to enhance and add to our capabilities in high value IT solutions, mobility lifecycle services, commerce and fulfillment solutions and cloud, while also further extending our geographic reach," the company said.
• Few to no layoffs are planned following the acquisition. Additionally, none of Ingram's current offices, facilities or warehouses will be impacted by the deal. No effect on daily operations or dealings with partners are expected, either.
• Once the deal is complete, Ingram Micro will no longer be publicly traded on the NYSE stock exchange.