Acquisition of Ingram Micro Draws Intense ScrutinyBy Mike Vizard | Print
The proposed $6 billion acquisition of Ingram Micro by a multibillion-dollar Chinese conglomerate is starting to draw both investor and Washington scrutiny.
Investigating the Deal for Shareholders
Whatever the motivation, some are already questioning whether the deal is actually in the best interest of Ingram Micro shareholders. Based on the fact that the company reported $169 million in Non-GAAP earnings results for its third quarter 2016—a five percent increase year over year—shareholder rights attorneys at Robbins Arroyo LLP immediately announced they are investigating the deal. The law firm also notes that Ingram Micro grew its cloud business by more than 100 percent year-over-year on a constant currency basis in the 2015 third quarter. Similarly, Harwood Feffer LLP, another law firm, also announced that it will investigate the deal on behalf of shareholders.
Moody’s Investor Services, meanwhile, announced this week that it will be reviewing Ingram Micro debt ratings because HNA had not revealed whether existing Ingram Micro debt would be refinanced or assumed in connection with the acquisition.
Barring any other suitors, or efforts to increase the price that HNA will have to pay to acquire Ingram Micro, the deal is likely to pass muster despite any potential IT security concerns. The U.S. government already set a precedent when it allowed Lenovo to acquire the PC and x86 server business of IBM, along with the mobile handset business of Motorola.
As Ingram does not actually manufacture products, it will be difficult to claim that a distributor owned by a conglomerate in China represents any more of a threat to U.S. national security than Lenovo. Nevertheless, with some $23 billion in acquisitions of U.S. companies by Chinese companies already in 2016, the mood in Washington in an election year might be changing. In 2015, the value of those acquisitions totaled $100 billion.
In the meantime, Diane Krakora, CEO of channel consulting firm PartnerPath, says that even though Tianjin Tianhau Investment has pledged to keep the existing Ingram Micro management team in place, Ingram Micro will have its work cut out for it in terms of maintaining partner loyalty. That's especially the case with smaller partners, many of which may decide that a distributor with ties to China represents a customer concern for them—or is simply not a partnership they want to make.
However those decisions are made, Ingram Micro will need to spend the next year or more proving to partners that, as far as they are concerned, nothing is changing.
“We’ve all heard the pledges to existing management teams before,” says Krakora. “The partners are going to be aware that the Ingram Micro management team now has bosses they have to answer to every time they make a decision.”