Ingram Micro Acquired by Tianjin Tianhai part of HNA Group : (Reaction from Social Media)
Yesterday morning 18/2 India time,I read news online, that Chinese group HNA has aquired Ingram Micro. Ingram Micro is an technology distributor. HNA was a chinese group into transportation, aeronautics and related infrastructure. The valuation was US$ 6 billion in cash. This was at 31% premium to its closing share price. This will be great return for its shareholders and good exit for founder group. People says there are no investors in reselling/distribution. Distributors make bad investment. The ROIC in distribution is poor. Please note there is 31% premium. Read here the press release . Those who are not sure what is Ingram Micro, Here is its story . This story talks about its peak revenue at 2013 of US$ 42.6B. Now the revenue will be about US$ 46B.
We take a look at social media reaction. We shortlist a facebook group and twitter feed. Ingram Micro is great American dream by itself. It successfully made acquisitions across globe. Managing vendors and partner relations, credit management, execution is best of class. Obviously some retire employees are emotional with HNA acquisition, However some joke about learning Mandarin, some are worried whether East coast office will close, others are more confident. One senior person thinks the founding father of Ingram family would not have approved this.
Chinese Companies have been acquiring companies overseas. They are spending money at the rate of US$ 1B per day. Some of the tweets are hinting that slowdown in chinese economy is resulting in acquisitions. Restrictions on Chinese currency movement makes it difficult to protect it from devaluation. Hence the acquisitions are a ploy to take currency overseas.
There are general news items. One is highlighting the Chinese financial strength by showing chinese currency. Some are saying now Chinese market will be open to Ingram Micro almost exclusively. Currently china has partial controls on MNC distributors. However those will be gone with Chinese ownership. Some generally dramatizing by showing Chinese letters on Ingram Micro building or showing the HNA group flying high . According to Reuters columnist Rachel Morarjee, there are three reasons the deal makes sense for HNA: “it offers a hedge against a devaluing yuan”, diversifies away from the slowing economy, as well as the need “to amass political capital.” Read this blog here
The channel seems to be more cautious.
Journalist from Financial Press points out that even with this 31% premium the IM stock trails to its 1998 pricing (probably pre dotcom, intermediaries had more margins)
Ingram Micro Global CEO Alain Monie wrote a memo to all employees, here is the related article. While it is status quo today, What may happen in future in anybody’s guess. Time will tell if the new owners will make changes in its functioning. However if you go by the article, the CEO seems to be confident of being in control and ensuring continuity in management.
Some are having doubts about doing government business (in multiple countries) due to Chinese ownership. However I am not sure whether government check the distributor anyway. Ingram Micro served the IT industry very well and hopefully will do so in future. I will be looking forward to its success under HNA brand.