Ingram Micro chief executive Alain Monie said becoming part of Chinese conglomerate HNA Group will enable the distributor to gain market share in China and invest without being hamstrung by Wall Street.
The US-headquartered distributor has been operating independently in China for 18 years, yet despite some success remains the third or fourth largest IT distributor in the 1.4-billion-person nation. Monie believes that will change once HNA affiliate Tianjin Tianhai closes its US$6 billion (A$8 billion) acquisition of Ingram Micro.
"It's difficult to be successful in China because of the competition there, and there are very serious players," Monie said Wednesday at Ingram Micro ONE. "In this case, we're going to have the chance to become number one."
Monie told the more than 2000 people in Las Vegas that being privately-owned will make it possible for Ingram Micro to invest faster and take more risks. Ingram Micro is currently traded on the New York Stock Exchange; HNA Group is privately held, though its subsidiary Tianjin Tianhai is listed on the Shanghai Stock Exchange.
"Being listed on Wall Street limits your ability to invest in higher technologies at a faster pace," Monie said. "It [becoming part of HNA] is going to be a very good way to accelerate our investments and bring to you technologies and business models that, until now, have been more difficult to put in place."
Although Ingram Micro's focus on growing its e-commerce, cloud and lifecycle services practices have not changed, Monie said HNA's financial backing will make it possible for Ingram Micro to invest faster and have more intent with its strategies. The deal is expected to close by the end of the calendar year.
Although HNA owns transportation and shipping entities such as Hainan Airlines, China's fourth-largest airline, the China-based conglomerate does not currently have any IT-related investments.
"HNA does not have a business like ours, so there's no integration with anything that they do today," Monie said. "What we're going to be doing is leveraging their investment power, their presence around the world in various areas, and their ability to invest."
That's in marked contrast to Tech Data's US$2.6 billion acquisition of Avnet Technology Solutions, which will result in US$100 million of cost cuts in the two years after the deal closes, mostly around combining the enterprise resource planning (ERP) systems run by each distributor into a common platform.
Monie said that when he took over as Ingram Micro's CEO in January 2012, the distributor had defined a tiered investment strategy but was investing in that strategy at far too slowly. Monie accelerated that pace of investment, which prompted a negative reaction from Wall Street since institutional investors wanted to see profits returned to shareholders rather than being diverted back into the company.
The company began making acquisitions a few months after Monie came on board, of which the first big one was wireless device distributor BrightPoint for US$650 million. Monie said Ingram Micro's stock price fell after the deal was announced in July 2012.
"People were saying, 'Instead of returning cash to their shareholders, they're investing in the business'," Monie said. "Well, that's the only way to stay alive."
Although Ingram Micro's valuation initially fell after the BrightPoint deal, fortunes improved once the investment community understood that Ingram was doubling down on the right technologies. Ingram Micro has subsequently carried out 27 acquisitions since 2014, according to Paul Bay, Ingram Micro's president for the Americas.
Becoming part of HNA will serve as a multiplier for those efforts, Monie said, enabling Ingram Micro to increase its base of investment.
"We need to continue being very successful in converting this change of ownership, which is going to allow us to grow faster and invest faster," Monie said. "Unless you invest, you're not going to stay alive very long."
BCTI hopes that the opportunity of offering a broader spectrum of products and having more buying power outweighs the challenge of bringing two different cultures together with Ingram Micro and HNA, said Ken Clifton, an account executive for the Gray, Tenn.-based Ingram Micro partner.
Clifton said he'd like to see Ingram Micro use HNA’s capital to bring more information around emerging technologies such as artificial intelligence to solution providers and help its partner community figure out how they can most effectively bring those technologies to the marketplace.