Santa Ana-based Ingram Micro Inc. reportedly is in talks to make another big acquisition in Asia.
The company is said to be looking to buy a 60% stake in a Hong Kong-based company that is the biggest distributor of technology products and services in China, according to Reuters and Sing Tao Daily News of Hong Kong.
Ingram, the world’s biggest distributor of technology and electronics gear, could pay $260 million for the majority stake in Digital China Holdings Ltd., the reports said.
The parent of Chinese computer maker Lenovo Group Ltd. owns 48% of Digital China.
An Ingram spokesman said the company wouldn’t comment on the story.
If the deal were to close, it would be Ingram’s second major buy in Asia in the past two years. In late 2004, Ingram bought Australia’s Tech Pacific Ltd. for $530 million.
Tech Pacific operates in several Asian countries and Hong Kong, but not in mainland China.
Ingram has operations in China, but would see its presence grow significantly with Digital China.
One analyst who follows Ingram said he has heard of the rumored buy, but doesn’t know if it’s true or not.
Acquiring part of Digital China would be “a very good move,” said Andrew Hargreaves, an analyst with Pacific Crest Securities Inc. in Portland, Ore. “It would make them the dominant player in China. It would probably strengthen their relationship with Lenovo and other Chinese (companies).”
Digital China posted sales of $1.9 billion for the nine months ended Dec. 31, up 24% from a year earlier. Profits were up 38% to $27 million. Its biggest and fastest-growing segment was the distribution business, which grew 28% to $1.1 billion in sales in the period.
Buying Digital China would boost Ingram’s razor-thin margins. Hargreaves said that while Digital China has an operating profit of 2.4%, Ingram’s is closer to 1.4%.
Asia is important to Ingram’s growth plans.
With its buy of Australia’s Tech Pacific, Ingram just about doubled its revenue in Asia. Before the deal, Ingram did sales of about $2.2 billion in the region while Tech Pacific did some $2.5 billion.
It was the biggest acquisition in the company’s history and has gone better than the company expected, Ingram said. Chief Executive Greg Spierkel said he feared Tech Pacific would lose $400 million within a year of the acquisition, but that didn’t happen.
Ingram’s fastest-growing region was Asia in the fourth quarter. Sales were up 27% compared to the same period a year earlier.
Spierkel has said that population growth alone in China and India makes them ideal markets for Ingram.
In an interview in February, Spierkel said Ingram is looking to stoke sales growth this year and is open to more acquisitions,if they’re a good fit.
“We’re a company that’s looking at opportunities all the time,” he said. “That’s part of our responsibility,to find areas of better growth and probably better profit potential for the long-term. There are a very large number of areas where we think there are opportunities.”
However, when Spierkel talked about potential geographic areas eyed for expansion, he said the company was focused on countries where Ingram has no presence.
Still, China has to be attractive with an emerging middle class and one of the fastest-growing economies in the world.
While the U.S. economy has grown at about 3.5% to 4% the past few years, China’s annual growth rate has been around 10%.
Digital China develops and distributes networking products in China through a joint venture with Taiwan’s D-Link Corp., a networking products company that has its U.S. headquarters in Fountain Valley.
The company said it provides next-day shipping to 100 big cities in China and two-hour delivery to a dozen others.
