$3 billion boost for Ingram Micro

Acquisition of Intelligent Electronics arm will give the distributor even greater negotiating power

US giant Ingram Micro has signed a definitive agreement to purchase Intelligent Electronics? $3 billion distribution division for $78 million.

The sale allows US-based Intelligent Electronics to retrench its entire operation into becoming a reseller-only company.

In a statement, Intelligent Electronics chairman Richard Sanford said the sale allowed the company to focus on the direct sales of systems and services. It will be left with its direct operation, XL Source, as well an 80 per cent stake in networking subsidiary XL Connect Solutions.

Intelligent Electronics had previously intended to spin off XL Connect Solutions, but indicated that this was now unlikely. Sanford admitted that Intelligent Electronics was continuing to evaluate strategic options to enhance shareholder value.

The company estimated the sale of its distribution division will result in a pre-tax gain of $25 million before potential purchase price adjustments and transaction-related costs.

US observers claimed they were pleased with the sale because there is always an element of doubt about dealing with an organisation that has both a direct arm and a distribution side to its business.

One source said Intelligent Electronics was always known as the distributor that led price wars and that the pressure will now ease on other US players.

The purchase of Intelligent Electronics adds another $3 billion of revenue to Ingram Micro?s existing US turnover of $12 billion. The deal gives Ingram the clout to renegotiate its terms with its vendors as it continues to dominate the US distribution market.

Last week, Ingram reported a Q1 profit of $41.8 million on an increased turnover of $3.65 billion. This was the first time that Ingram had released its figures since the distributor was floated on the US stock exchange last year (PC Dealer, 30 April).