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Ingram Micro grabs Tech Pacific

Global distribution behemoth Ingram Micro has agreed to buy Asia Pacific IT distribution outfit Tech Pacific for US$493m in cash. The deal nearly doubles Ingram Micro’s business in Asia Pacific.

Ingram Micro has signed a definitive agreement to buy Asia-Pacific IT distribution outfit Tech Pacific for US$493m in cash. The deal nearly doubles Ingram Micro’s business in Asia Pacific, but also serves as a reminder that the distribution behemoth’s global presence does not yet extend into the Middle East and Africa (MEA) region.

While Ingram Micro has operations in the Americas, Europe and Asia Pacific, it has so far resisted the temptation to buy or grow a significant operation in MEA. In contrast, Tech Data — Ingram Micro’s main rival on the global distribution stage — does have a presence in MEA as well as Europe and the Americas, but has yet to build up a meaningful presence in Asia-Pacific.

The US$493m cash sum offered by Ingram Micro for Tech Pacific includes the assumption of the acquired company’s debt. Tech Pacific posted sales of US$3.1bn in fiscal 2003 with operating margins of approximately 2%. The privately held company employs 1,800 staff and has 15 distribution centres spanning India, Malaysia, Singapore, Thailand, Hong Kong, Australia and New Zealand. Tech Pacific carries a portfolio of 10,000 products and serves more then 25,000 resellers.

“As the only global IT distributor with operations in Asia Pacific, we have long recognized the growth opportunities of the region,” said Kent Foster, chairman and CEO at Ingram Micro. “This acquisition provides a giant leap forward in our regional development. Tech Pacific is a strong, profitable player in some of the region's key markets.”

Greg Spierkel, president at Ingram Micro, added: “Tech Pacific has skilled, seasoned managers who have been highly effective in growing the business and enhancing profitability in developing markets. The combined organization will substantially benefit from their expertise.”

Ingram Micro’s sales in Asia Pacific totaled US$558m for the quarter ending July 3rd 2004, giving it annualised sales run rate for the region in excess of US$2bn. The company claims that this deal will nearly double its revenues in Asia Pacific, position it as the leading distributor in India, Australia, New Zealand, Malaysia, Hong Kong and Singapore, and boost operating margins.

While both companies boast Asia Pacific product portfolios including systems, networking and peripherals vendors, Tech Pacific brings a strong software business to the combined entity, complementing Ingram Micro’s components strength in the region.

“We’ve been seeking a strategic partner that could help our customers — both resellers and vendors — expand their reach into new products, services and geographies,” said Shailendra Gupta, CEO at Tech Pacific. “At the same time, we wanted to ensure a stable transition for our associates. Ingram Micro is the world’s largest distributor and the only distributor with a truly global presence, so a combination offers an ideal strategic fit.”

Shailendra’s contention that Ingram Micro is the ‘world’s largest distributor’ is correct. However, to ensure it has a ‘truly global presence’, Ingram Micro still needs to address the one white spot left: the MEA region.

To date, the company has toyed with alliances in the region, most notably with regional distributor Aptec. Whether or not Ingram Micro will finally complete its global presence by taking the plunge in the Middle East anytime soon remains to be seen.

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