Ingram Micro Parent HNA Group May Be Taken Over By Chinese Government: Report

‘Ingram can say whatever they want, but if their parent company is the Chinese government it is going to impact any sales opportunities, logistics opportunities and secure supply chain opportunities involving government agencies, government support agencies and federal system integrators,’ says Future Tech CEO Bob Venero.

The Chinese government plans to “seize control” of Ingram Micro parent HNA Group Co. in a bid to contain the “deepening economic damage” from the coronavirus, according to a Bloomberg.com report.

China plans to take over indebted conglomerate HNA Group Co. and sell off its airline assets in order to meet “financial obligations,” according to a Bloomberg report. HNA Group had debt of $69 billion as of last June, according to Bloomberg.

Bloomberg cautioned that “talks could drag on or fall apart,” quoting people who asked not to be identified because the “discussions are confidential.”

A U.S. spokesman for HNA told CRN that it has not issued a statement on the matter.

Ingram Micro told CRN that it does not comment on “rumors and speculation” and that there is nothing new to report. “You have seen the headlines,” said an Ingram Micro spokesperson. “We believe this is all related to issues with the aviation portion of the HNA business and has nothing to do with Ingram Micro.”

In fact, Ingram said it operates as a “separate, stand-alone company that has effectively ring-fenced, or isolated its business to significantly minimize impact from any issues experienced by HNA or its affiliates.”

Paul Bay, executive vice president and president, Global Technology Solutions, Ingram Micro, said through a spokesman that it is “business as usual” for the world’s largest distributor of IT products and services. “We are here to serve as an indispensable business partner today, and every day,” he said.

Bob Venero, CEO of Holbrook, N.Y.-based solution provider Future Tech, No. 101 on the CRN 2019 SP500, said Chinese government ownership of HNA would impact Ingram participation in government sales opportunities.

“Ingram can say what ever they want, but if their parent company is the Chinese government it is going to impact any sales opportunities, logistics opportunities and secure supply chain opportunities involving government agencies, government support agencies and federal system integrators,” said Venero. “We have to give our government customers full transparency to a secure supply chain. If part of that supply chain is tied to ownership from the Chinese government it will not pass the customer audit. For our purposes if Ingram Micro parent company is acquired by the Chinese government we will have to cease all government activities and procurement with Ingram. We could still work them on commercial engagements, but we could not work with them on anything that has to do with government agencies or federal systems integrators.”

If the Chinese government ends up taking over HNA Group it would be “everybody’s worst nightmare,” said Martin Wolf, president of martinwolf M&A Advisors of Scottsdale, Arizona., one of the top channel investment advisory deal-makers.

“They are an authoritarian, Communist regime,” said Wolf. “If this happens I feel bad for the people that work at Ingram. That would be a real heavy load to carry. Most systems integrators are real patriots. If this happens they would in effect be supporting the Chinese government. If there is an interim process then it would be manageable. Unless this is a very short term thing it will affect Ingram Micro’s business. Let’s be clear here: you are giving money to the Chinese government directly…It is one thing to do business with a Chinese company that pays taxes. In this case the Chinese government would be the shareholder. “

Wolf said he is “surprised” that a private equity company has not yet struck a deal to buy Ingram. “This is a perfect private equity deal,” he said. “Ingram is a really great asset - one of the greatest assets out there.”

The ultimate irony, Wolf said, is that Ingram Micro was “created by the great leader (legendary distribution visionary) Chip Lacy and it could end up being run by the ‘great leader’ Xi Jinping.”

One high-level channel executive, who did not want to be identified, said Chinese ownership of HNA would be “very disruptive” for Ingram Micro and its channel partners.

“It’s one thing being owned by a Chinese company,” he said. “It is another thing to be owned by the Chinese government. That has implications for partners. I think the US government would have to review this.”

The channel executive said the HNA Group Ingram saga is a classic case of the dangers of taking on a staggering amount of debt.

“HNA has huge debt that they have to find a way to pay,” said the executive. “They are in financial straits. Partners need to be following this closely to see what the potential impact is going to be. Ingram is the largest distributor in North America. This is unprecedented. Partners need to ask themselves do they want to be buying from the Chinese government? And what is the long term impact for their customers?”

Michael Goldstein, CEO of LAN Infotech, a Fort Lauderdale, Fla., solution provider that is a member of Ingram Micro’s Trust X alliance, a group of 350 SMB partners that teams closely with the distributor, said he was “shocked” by the news that the Chinese government could take control of HNA Group.

“It is good to hear Paul Bay say that it is business as usual,” said Goldstein. “It’s good to see that Ingram responded to this so quickly. I have full confidence in Ingram as my primary distributor.”

Goldstein said the potential Chinese takeover of the HNA Group shows how the coronavirus threat has moved from something that affected the health of a Chinese province to something that is now having financial reverberations throughout the world.

Goldstein, who has done business with Ingram Micro for more than 20 years, said he has not seen any coronavirus impact on his customers yet. But his 83-year-old mother, Mildred, just canceled a cruise to Japan and other ports in Asia that was scheduled for July. “When you see the impact of the coronavirus you realize how small the world is,” he said.

Additional reporting By O’Ryan Johnson