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Chinese Government May Take Over Ingram Micro Parent HNA Group

The Chinese government is preparing to take over HNA Group, a struggling conglomerate that owns U.S.-based technology distributor Ingram Micro, according to Bloomberg News. What would the move potentially mean for Ingram and its partners? Here’s the background.

> Related: Dear Warren Buffett — Please Buy Ingram Micro

To be clear: Ingram Micro’s business remains strong and profitable. And the distributor essentially operates independently of parent HNA Group. However, parent HNA Group has struggled under debt. And the ongoing coronavirus epidemic in China has further pressured some of HNA Group’s assets — particularly in the aviation industry.

Amid that reality, there are signs that the Chinese government may step in and take over HNA Group, Bloomberg News and the South China Morning Post report.

HNA Group and Ingram Micro: What’s Next?

That scenario could open a regulatory can of worms for HNA Group, according to a Bloomberg opinion piece — which states:

“An official takeover would mean ownership changes at its foreign affiliates and subsidiaries. Would Ingram Micro Inc., the Irvine, California-based electronics distributor HNA bought in 2016, effectively become a Chinese state-owned enterprise? And if it did, would the company then have to go back to the Committee on Foreign Investments in the U.S. for approval?

Under its existing agreement with CFIUS, Ingram Micro is required to operate as a standalone company, and is subject to annual audits of its compliance with certain operating and security agreements, according to Moody’s Investors Service. The company’s board composition is governed by an agreement with CFIUS and the U.S. Defense Department.”

Ingram Micro Perspectives

In response to the report, ChannelE2E pursued comment from Ingram Micro. A spokesperson for the distributor told ChannelE2E:

“We don’t comment on rumors and speculation. There’s nothing new to report but you’ve seen the headlines. We believe this is all related to issues with the aviation portion of HNA’s business and has nothing to do with Ingram Micro.

It’s also important to remember the points we’ve shared when previous rumors surfaced that give us confidence that there will not be any impact to our business. You’ve heard this from Paul Bay previously as we’ve shared with you when we became part of HNA Group in December 2016: Ingram Micro operates as a separate standalone company that has effectively ring-fenced or isolated its business to significantly minimize impact from any issues experienced by HNA or its affiliates.”

“The US government mandates that we must continue to run our business as a standalone company consistent with our pre-HNA acquisition practices. So any change in our ownership does not impact the fact that Ingram Micro maintains independent operations and financial strength. It’s business as usual here, and remains business as usual.”

HNA Group and Ingram Micro: Asset Sale Rumors

HNA Group acquired Ingram Micro in 2016 for $6 billion in cash. The distributor’s U.S.-based executive team has maintained its autonomy, and Ingram Micro’s overall business has generally performed well in recent years — including continued growth of its cloud services unit.

Rumors about HNA Group striving to sell Ingram Micro have surfaced multiple times in recent years. Alleged suitors have included Apollo Global Management and RRJ Capital. But no deal has surfaced, and Apollo went on to acquire Ingram rival Tech Data for $6 billion.

Meanwhile, Ingram itself has remained in acquisition mode — buying such IT services and consulting firms as Ictivity, Quosphere and Cloud Harmonics, among others. Ingram has also continued to promote from within — including a new role for Executive VP Paul Bay in December 2019.

The distributor is set to share updated recurring revenue partner strategies during the Ingram Micro Cloud Summit 2020, which is set for May 12-14 in Miami Beach, Florida.

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