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Writing Memo Open Letter 2

Why Ingram Micro Was Acquired: Morgan Stanley’s Advice, View

Morgan Stanley, which advised Ingram Micro on the distributor’s sale to Tianjin Tianhai, has developed a document describing the rational for the $6 billion deal, which ChannelE2E has viewed.

According document, Morgan Stanley sees the following deal synergies for Ingram Micro and its partners:

  • Ingram Micro will become part of a large organization that has complementary logistics capabilities including sea transportation, air transportation, ground transportation and modern logistics/cargo flow
  • Opportunity to leverage HNA’s significant presence in China and other emerging markets to strengthen Ingram Micro’s existing businesses and expand into new markets
  • Expand Ingram Micro’s IT distribution business and supply chain management capability into new fields, such as new consumer goods and industrial products
  • Provide value-added services around the world by taking advantage of both parties’ global customer bases, HNA’s global supply chain capabilities and Ingram Micro’s global distribution network
  • Leverage HNA’s financial and delivery arms, which may include improving supply chain financial service and enhancing storage capacity and land/sea/air multimodal combined transportation in China

The Morgan Stanley document also mentioned specific strengths of Ingram and the buyer, calling Ingram a “Global leader in technology and supply chain distribution services” across such areas as:

  • Technology Solutions
  • Mobility and Lifecycle Services
  • Cloud Services Enablement
  • Commerce & Fulfillment Solutions

Ingram Micro has over $40 billion of revenue (#62 on the US Fortune 100 list) from over 200,000 customers across 160 countries, the document noted.

Tianjin Tianhai, Morgan Stanley stated, is a publicly listed entity in Shanghai with ~$2 billion in cash. HNA Group is a privately held China based conglomerate structured around transportation, logistics and financial services. The company employs over 180,000 people worldwide; controls over $90 billion in assets including 820 aircraft, 330 retail stores, 450 hotels and 50 ships, the document mentioned.

Related ChannelE2E Coverage

  1. Ingram Micro Acquired By Tianjin Tianhai for $6 Billion: Breaking initial news about the deal, the regulatory considerations and more.
  2. Ingram Micro Buyout FAQ: An extensive FAQ, prepared by Ingram Micro, explains the reasoning behind the deal, along with continued commitments to employees, partners, compliance regulations, and Ingram Micro’s overall business.
  3. Ingram Micro CEO Letter to Employees: The email from CEO Alain Monie to all Ingram employees, assuring them that it will remain business as usual under new ownership.
  4. Ingram Micro Letter to Partners: An Ingram memo crafted specifically for partners, assuring them that relationships will remain unchanged — and highly valued.
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2 Comments

Comments

    Jim Lippie:

    Great coverage Joe! What I fund interesting is the valuation which turns out to be about 15% of annual revenue and a healthy premium over what the market has been recently trading the stock. I think it’s s clear message to every channel partner who continues to push hardware. The largest Hardware distributor in the world with more scale ($40B annual revenue) and more logistical assets than anyone else in the space, including some service lines of business just sold for 15% of revenue. What do you think your hardware business is worth???

      Joe Panettieri:

      Hey Jim,

      Your thoughts reinforce a recent podcast conversation we had with Service Leadership Inc. CEO Paul Dippell, who said traditional resellers (product & hardware centric) are typically worth about 10 cents on the dollar (valuation vs. revenue). The valuations climb dramatically as IT service providers shift to managed services and recurring revenue models, according to Service Leadership’s data.

      Thanks for reading ChannelE2E and weighing in, Jim.
      -jp

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