What Ingram Micro's acquisition means for distribution

What Ingram Micro's acquisition means for distribution

The sale that asks a thousand questions and resonates through distribution

Alain Monié - CEO, Ingram Micro

Alain Monié - CEO, Ingram Micro

Ingram Micro's acquisition by Chinese company, Tianjin Tianhai, for $US6 billion will change the face of distribution worldwide.

Distribution Central CEO, Nick Verykios, is in the US and was about to jump on a plane when ARN caught up with him: "It opens a thousand questions for distribution and for vendors. Like who are going to be the powerbrokers?

"What does it mean for vendors? What does it mean for global distribution? These are massive questions.

"There are issues concerning vendors and trade in China. It's going to be a political issue as well. It's going to be awesome watching all this. Who knows what's going to happen"

Verykios' points are well made given the sometimes delicate relationships surrounding trade and security with China in recent years involving both the US and Australia. How this will be viewed will be the major factor in how it plays out globally.

However, global observers are already all pointing to one thing that this acquisition is further evidence of the the growing push by Chinese companies to buy overseas IT assets.

In its report on the sale Bloomberg wrote: "The purchase is further evidence of China’s determination to acquire overseas technology assets to boost its domestic capabilities and replace imports. China’s publicly traded firms are in the midst of their biggest-ever international shopping spree.

"The country’s listed companies have announced $23.8 billion of outbound deals so far this year, according to data compiled by Bloomberg. After just 48 days of 2016, that’s already closing in on the record tally of $25.6 billion announced during the whole of last year."

Dicker Data CEO and chairman, David Dicker, said, "A very significant change in the distribution landscape. It will be very interesting to see how it plays out in the next year or so. Globally and especially locally."

Head of Staples Technology Solutions, Karl Sice, agreed the acquisition brings more questions than answers at the moment. But, at first glance, he said it signals benefits in terms of a wider global footprint and enhanced core logistics capabilities.

"Ingram always dreamed of having a wider, deeper capability to logistics and this gives them that," he told ARN. "It is fascinating to watch what will happen in the vendor landscape. At the moment, we have more questions than answers. But it is exciting times. I've never seen a time in industry with so much change as we are witnessing now."

And there's more reaction on the partner front. eNerds chief executive, Jamie Warner, said, "The Ingram Micro sale to Tianjin Tianhai will provide larger logistics operation globally, which in turn might help further reduce the overall cost of products shipped to Australia, which may benefit resellers via more margin. It will be interesting to see the impact of this deal on the Australian market."

HubOne CEO and founder, Nick Beaugeard, said it was a fascination deal and showed how distribution has a low valuation. The deal portends forthcoming changes in distribution.

Telsyte senior analyst, Rodney Gedda, said there has been a lot of investment by Chinese companies into western markets. As such, the acquisition shouldn't come as a surprise to the industry.

"This isn't extraordinary because we already have big companies such as Huawei investing into western markets and they are becoming a crucial part of the supply chain. These Chinese companies are pretty good in driving efficiencies out of processes and supply chains.

"It shouldn't disrupt the channel very much. If anything, it opens up opportunities for better route to market and bringing in Chinese products to the Australian market as well as other geographies where Ingram Micro operates," he said.

Channel Dynamics co-founder, Moheb Moses, said with Ingram's recent acquisition of Odin and its investments in the Cloud, Tianjin Tianhai, will now get access to one of the largest companies in Cloud and digital distribution.

"It may expose Ingram to some more Chinese brands and create some awareness for those brands in the US market," he said.

ARN Hall of Fame inductee and IT industry veteran, Philip Cronin, said the industry is always ripe for change.

"It would be timely to see what it means for competition within the distribution market, and what that in-turn means for customers," he said. "What we may find is a tie up with more vendor products that we don't recognise today from the China market."

Huawei Australia channel sales director, Leo Lynch, said it was always watching and analysing changes in the market and how they impact Huawei.

"At this point in time we are still assessing the local impact, if any," Lynch said.

Tianjin Tianhai will acquire Ingram Micro for $US38.90 per share in an all-cash transaction. Upon close of the merger, Ingram Micro will become a part of HNA Group, a Hainan-based Fortune Global 500 enterprise group and a leader in aviation, tourism and logistics and the largest stockholder of Tianjin Tianhai.

The transaction, which has been unanimously approved by both Ingram Micro's and Tianjin Tianhai's boards of directors, represents a premium of approximately 39 per cent over the average closing share price of Ingram Micro for the 30 trading days ended February 16, 2016.

Following the close of the transaction, which is expected in the second half of 2016, Ingram Micro will operate as a subsidiary of Tianjin Tianhai, consolidated under HNA Group, the largest stockholder of Tianjin Tianhai (via HNA Group's subsidiaries).

More to follow.

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Tags Ingram MicroTianjin Tianhai



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