China’s HNA sees US$6 billion deal for Ingram Micro as key part of ‘internationalisation process’

PUBLISHED : Thursday, 18 February, 2016, 8:58pm
UPDATED : Thursday, 18 February, 2016, 9:14pm

Chinese aviation and logistics conglomerate HNA Group is looking to make a big foray in the global information technology industry with its takeover of Ingram Micro, a US-based hi-tech products distributor, in a deal worth US$6 billion.

The cash transaction, which is expected to close in the second half of this year, would make Ingram Micro the largest enterprise in terms of revenue under HNA, which is based in the southern island-province of Hainan.

It marks the biggest pending Chinese technology related acquisition in the US, ahead of the US$3.8 billion investment by Unisplendour Corp, a unit of state-backed Tsinghua Holdings, in Western Digital, the world’s largest supplier of data storage devices.

Shanghai-listed Tianjin Tianhai Investment Company, in which HNA is the controlling shareholder, on Thursday announced that it has agreed to purchase Ingram Micro for US$38.90 per share.

This represents a premium of about 39 per cent over the average closing share price of the US firm for the 30 trading days ended February 16.

READ MORE: Avolon chief executive takes up post in Hong Kong after HNA buyout

Once the deal is completed, Ingram Micro will operate as a subsidiary of Tianjin Tianhai, consolidated under HNA. Ingram Micro is expected to remain headquartered in Irvine, California, and its executive management team will remain in place.

In a statement, HNA chief executive Adam Tan Xiangdong said Ingram Micro will “facilitate the internationalisation process of the group”.

“With the help of Ingram Micro, HNA Group would have access to business opportunities in emerging markets, which have higher growth rates and better profitability,” Tan said.

He said the addition of Ingram Micro would help the logistics business of HNA transform into “a supply chain operator, and provide one-stop services while improving efficiencies”.

READ MORE: HNA’s purchase of US$450m stake in Brazilian airline expands its global footprint

HNA, which has assets valued at more than US$90 billion and 180,000 employees, is involved in aviation, financial services, tourism, logistics and in holdings that include property development, retail management and industrial investment.

Founded in 1979, Ingram Micro describes itself as a leader in technology and supply chain solutions with about 27,000 staff. It runs 122 distribution centres worldwide and represents about 1,700 suppliers, including Lenovo Group, IBM, Microsoft, Cisco Systems and Apple.

“As a part of HNA Group, we will have the ability to accelerate strategic investment, as we continue to capitalise on the constant evolution of technology and emerging trends by adding expertise, capabilities and geographic reach,” Ingram Micro chief executive Alain Monié said.

“Additionally, Ingram Micro will now be part of a larger organisation that has complementary logistics capabilities and a strong presence in China that can further support the growth and profitability objectives of our vendor and customer partners.”

HNA has been making strategic investments as it pursues stronger domestic and overseas growth.

Last month, it invested an undisclosed amount in the China operations of US ride-hailing app pioneer Uber.

Its big deals last year included the acquisition of Irish aircraft lessor Avolon in a deal valued at US$7.6 billion and cargo-handler Swissport for 2.7 billion Swiss francs (US$2.82 billion).

Increased Chinese investments in the US, however, may see more scrutiny amid recent efforts by US lawmakers to block the proposed sale of the Chicago Stock Exchange to Chongqing Casin Enterprise Group.

Larry Sussman, managing partner at the Beijing office of international law firm O’Melveny & Myers, said national security concerns will not stop the flow of investments to the US from China.

“The Chinese rightly see the US and its growth potential as an appealing investment,” Sussman said.

“Chinese economic growth is slowing, its markets are increasingly competitive and its government has made efforts to promote freer movement of capital.”

A report by research firm Rhodium Group last month said the pipeline of deals for Chinese investors in the world’s biggest economy was “at an all-time high” this year.

“We count more than US$22 billion worth of pending acquisitions, focused on information and communications technology, electronics, white goods, entertainment and financial services,” Rhodium analysts Thilo Hanemann and Cassie Gao said in the report.