China's HNA to buy US' Ingram Micro for $8b

IRVINE • Chinese aviation and shipping conglomerate HNA Group is buying US electronics distributor Ingram Micro for about US$6 billion (S$8.4 billion), the latest in a string of overseas deals by Chinese companies.

The offer of US$38.90 per share from HNA unit Tianjin Tianhai Investment represents a 31.2 per cent premium to Ingram's closing price on Wednesday.

Chinese companies have been aggressively splurging on foreign acquisitions to sidestep slowing domestic growth. The total value of Chinese outbound acquisitions topped US$1 trillion for the first time last year.

But some Chinese deals have hit a roadblock in the United States after the US Committee on Foreign Investment in the United States (CFIUS) raised concerns over national security.

Fairchild Semiconductor said on Tuesday that it had rejected an offer from China Resources Microelectronics and Hua Capital Management, citing concerns over the US approval process.

Ingram said in a regulatory filing that Tianjin Tianhai will be required to pay the company a fee of US$400 million if the deal is terminated, following a CFIUS investigation.

NOT A SECURITY ISSUE

I don't expect it would be a security concern as Ingram Micro is a distributor of the equipment, and the vast majority of the products do not go to high-security customers.

MR KEITH HOUSUM, a Northcoast Research analyst

Northcoast Research analyst Keith Housum said: "I don't expect it would be a security concern as Ingram Micro is a distributor of the equipment, and the vast majority of the products do not go to high-security customers."

The deal will help HNA Group, the owner of China's Hainan Airlines and the largest stockholder in Tianjin Tianhai, bolster its logistics arm with Ingram's supply chain network. It will also give the company a stronger foothold in high-growth emerging markets through Ingram's large international presence.

As part of the deal, Ingram Micro will suspend its quarterly dividend payment and its share repurchase programme, the company said.

Morgan Stanley was financial adviser to Ingram Micro, while China International Capital Corp and Bravia Capital were lead financial advisers for HNA Group.

REUTERS

A version of this article appeared in the print edition of The Straits Times on February 19, 2016, with the headline 'China's HNA to buy US' Ingram Micro for $8b'. Print Edition | Subscribe