Australia's distributors shocked by Ingram Micro deal

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Australia's distributors shocked by Ingram Micro deal

Ingram Micro's local competitors have expressed surprise – bordering on shock – at today's news of an acquisition by Chinese-owned HNA Group for US$6 billion.

The company stressed there will be "no change to the way Ingram Micro does business with vendors and customers" and that "all lines of business and local country operations continue unaffected".

However, some of its local competitors expect major ramifications across the Australian and international IT channel.

Some distie bosses told CRN of their initial views, though others asked for time to collect their thoughts.

The value of the deal grabbed attention. The regional boss of one distie told CRN they were "flabbergasted – it is a cheap price".

[Poll: Do you think US$6 billion is a fair price for Ingram Micro?]

David Dicker, the boss of the largest Australian-owned distributor was less surprised. "The price is in line with what you'd expect."

By way of comparison, Ingram Micro paid A$700 million to acquire Tech Pacific in Australia in 2004 – roughly US$500 million a decade ago or nearly US$650 million when accounting for inflation.

Distribution Central's managing director, Nick Verykios, said the deal "raises a thousand questions".

"We are all going to learn a hell of a lot over the coming year as this all plays out," he said.

Dicker suggested that the Chinese ownership is "probably not going to go down to well in many circles in the US".

The US government, for instance, has banned Chinese vendors such as Huawei and ZTE from major wireless contracts. The Australian government imposed a similar ban on Huawei.

CRN attempted to contact local management of both US and Chinese vendors represented by Ingram Micro Australia, though they were either unavailable, or unwilling to comment. Major brands sold by the distie include HP Inc, Hewlett Packard Enterprise, Cisco and Lenovo.

Only last week, Hewlett Packard Enterprise announced the outcome of its distribution tender, with Ingram Micro securing a position, but Taiwanese-owned Synnex and US-owned Avnet both ousted.

In a letter to vendors and customers, Ingram Micro said the merger "will not impact the way we do business together".

"HNA Group has assured us that Ingram Micro will continue to be headquartered in Irvine, California, our management team and associates are all expected to remain in place and our local country operations and execution on our strategies will continue unaffected."

HNA Group is a multinational conglomerate with more than US$90 billion in assets, spanning aviation, airport management, financial services, real estate, retail, tourism, transportation and logistics. 

Shock and surprise

The news took the channel by surprise, and management of local distributors asked CRN for time to digest the ramifications. Few were willing to comment on the record.

The local management of Avnet and Westcon were all overseas, so told CRN they weren't in a position to comment.

The boss of a small Australian distributor, who asked not to be named, questioned whether the deal would ultimately be approved. "Will the US government have anything to say about?"

Asking to remain anonymous, a senior manager at the Australian office of one of the world's biggest distributors told CRN: "I am still trying to work out what I think it means. Globally it is a well-known fact in the public domain that they [Ingram] have struggled with profitability, so a cash injection from whoever has to be a reasonable thing.

"They have stated they want to invest in a bunch of new technologies to take them forward, so that can't be a bad thing. They are a formidable organisation, but I haven't shook out what it really means yet. It is interesting being a Chinese-owned company, having a big part of business in the US, that will interesting," said the unnamed source.

In its most recent annual filings, for the 12 months to 3 January 2015, Ingram Micro grew global revenues 9 percent to US$46.5 billion, while profits fell 14 percent to US$267 million.

Ingram Micro has been ploughing investment into its cloud offerings. In December, it revealed it had acquired Odin, the intellectual property behind its cloud marketplace, for an undisclosed sum. The deal brought onboard 500 staff, many of them developers.

In the letter to vendors and customers, Ingram wrote: "As a part of HNA Group, Ingram Micro expects 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 stock market reacted swiftly to the news – Ingram's share price is up 23.22 percent in after-hours trading.

Some of the distributor's biggest rivals also saw an uptick in after hours trading, with Tech Data up 3.7 percent and Avnet up 0.2 percent.

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