Ingram grabs Tech Pacific for $750 million

Ingram grabs Tech Pacific for $750 million

Ingram Micro has acquired Tech Pacific in a $750 million cash deal that should be finalised by the end of the year.

The merged company will become the dominant distributor of computer and communications products in New Zealand. It will also be the largest distributor in Australia and elsewhere in the Asia-Pacific region.

Ingram’s Asia-Pacific business will effectively double — meeting a corporate strategic goal to expand in the region.

Tech Pacific managing director Tony Butler says he is delighted with the deal. “It’s the best outcome from my point of view and the best outcome for my staff.”

Butler says, “The best IT distributor in the world has joined forces with the best IT distributor in the region. In the USA, Ingram is in very much the same position as Tech Pacific in New Zealand. Both companies have the same business vision, similar strategies and similar ways of working.”

Greg Spierkel, president of Ingram Micro says that although the two companies operate in a similar space, they are largely complementary. “Ingram and Tech Pacific overlay in 17 countries but we have different businesses. Ingram mainly deals with components while Tech Pacific operates more around software and fulfilment,” he says.

Butler says the lack of crossover between the two operations in New Zealand means it is unlikely there will be any job losses. “Usually when something like this happens, people look for efficiencies. But distribution is different. For example, the number of people we employ in our warehouses depends on the number of boxes moving in and out. It’s the same in our call centres.

“In many roles we’ll need more people, not less. There will be some new roles created and some will go away in the new organisation, but the object of the exercise is to increase the overall business. We expect the sum of the two parts to be greater than the whole.”

Butler points out that both companies operate along lean lines. “There’s not much fat in either company. Neither are ready to be trimmed.”

Tech Pacific employs some 1800 people across 15 sites in New Zealand, Australia, India, Hong Kong, Malaysia, Singapore and Thailand. Last year the business generated around $3.3 billion in revenues across the region and $412 million in New Zealand.

Ingram’s regional business is currently worth around $3.5 billion. The company’s global revenues are US$22 billion. Spierkel says that buying Tech Pacific will bulk up the company by somewhere between 8% and 10% globally, with the regional contribution growing to 22% of the worldwide total.

He says the acquisition will give Ingram leadership in Australia and New Zealand, but more importantly it will give the company a much stronger presence in rapidly-developing India and the Asean countries.

Until the acquisition was announced on Monday, Tech Pacific appeared to be heading for an initial public offering (IPO) on the Australian Stock Exchange.

However, the company’s majority shareholder, venture capital fund CVC Asia-Pacific decided to sell the 58.5% stake purchased last year to Ingram rather than risk the uncertainty of a float. The company’s other shareholders, the Netherlands-based Hagemeyer with 31.5% and Tech Pacific managers with 10% also agreed to sell. Ingram’s buy price of $750 million was inside the range expected to be raised by a float.

Spierkel says one asset he is picking up in the deal is Tech Pacific’s management team. Tony Butler says he will be staying with the company but the new roles have not yet been defined.

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