Platinum Equity is in negotiations to buy the IT distributor from debt-ridden owner HNA Group
A private equity firm reportedly is in negotiations to buy global IT distributor Ingram Micro for $7 billion from its financially troubled owner, Chinese conglomerate HNA Group.
The Lowdown: In a report, Bloomberg – citing unnamed sources – said Platinum Equity is in “advanced talks” to acquire Ingram Micro, which HNA bought in 2016 for about $6 billion. HNA, Ingram Micro, and Platinum have not commented on the report.
The Details: HNA has a broad portfolio of businesses in a range of industries, from airlines to banks and hotels, and as of earlier this year was carrying more than $86 million in debt. There were reports that the company’s financial picture was so bleak that the Chinese province of Hainan was considering taking it over to prevent collapse from its debt-service pressure.
The COVID-19 pandemic and related travel restrictions only put more financial pressure on HNA, hitting businesses in the travel and hotel industries hard. Shedding Ingram Micro would bring much needed money to the company.
According to reports, even though the negotiations with Platinum appear to be in the late stages, there’s no guarantee that the deal will go forward. There’s also speculation that other suitors may be lining up to take a run at Ingram.
Ingram Micro, based in Irvine, California, has been at the center of acquisition reports in recent years. Apollo Management in 2018 was rumored to be interested in buying Ingram Micro, though no deal was made and Apollo a year later bought Tech Data. In 2019, RRJ Capital also reportedly was considering buying the distributor for $4 billion.
The Impact: Platinum Equity currently has a portfolio of about 40 operating companies and more than $19 billion of assets under management, according to the firm. In Ingram Micro, Platinum would add a company with about 33,000 employees worldwide and 2019 revenues of $47.2 billion – down from $50.4 billion the year before.
Background: Part of HNA’s debt issues are the result of a buying spree over the past several years that included Ingram Micro. However, the Chinese company was hobbled by an inability to grow revenue enough to address its debt, placing it in its precarious position. The coronavirus outbreak and its negative impact on the travel industry – particularly early on in China, where the pandemic originated – has only made the situation more difficult for HNA, which has let go of billions of dollars in holdings in such industries as real estate.