It appears the $6 billion deal for Irvine-based Ingram Micro Inc. will not result in the type of layoffs and management changes that ushered in a new era for Broadcom Corp. after its blockbuster sale closed a month ago.
The world’s largest distributor of technology products indicated that “very few, if any,” positions would be cut with “no impact on day-to-day operations” following its sale to Chinese conglomerate Tianjin Tianhai Investment Co. Ltd., a unit of HNA Group.
“HNA Group has assured us that it is committed to maintaining Ingram Micro’s operations, as well as our associates and management,” the company stated in a letter to employees.
Ingram Chief Executive Alain Monie, who has diversified offerings into higher-margin business lines in mobility, the cloud and add-on services, will retain the top post.
Irvine, home to about 950 employees through March 2015, according to Business Journal research, will continue to serve as headquarters. Ingram employed about 28,000 at that time in operations around the globe.
Hainan-based HNA, which controls $90 billion in assets through major operations in aviation, tourism and logistics, has “assured” Ingram Micro that facility or warehouse closures are not planned, according to regulatory filings.
Ingram Micro, founded in 1979, had annual sales of $43 billion last year and net income of $215.1 million.
Ingram Micro’s name and brand are not expected to change when the transaction closes in the second half of the year. The company will shed its listing on the New York Stock Exchange as an independent subsidiary of Tianjin, which is publicly traded on the Shanghai Stock Exchange.
Divergent Outcomes
The aftermath of the Ingram deal is setting up to be quite different from Broadcom’s $37 billion sale to Avago Technologies Inc., which created the world’s third largest chipmaker, with annual sales of about $15 billion.
The combined company, now known as Broadcom Ltd., switched the headquarters designation from Irvine to San Jose.
The Business Journal on Feb. 10 first reported the company slashed nearly 700 workers in Irvine as part of a nationwide cost-cutting plan under Chief Executive Hock Tan. The cuts, disclosed in filings with the California Employment Development Department, came a few days after Tan cleared out nearly the entire management team and board at Broadcom Corp. in an ongoing roll-up and restructuring strategy that’s been lauded on Wall Street.
Broadcom entered 2016 as OC’s 34th largest employer, with 2,400 local workers, roughly triple the size of Ingram Micro’s local operation. It had 11,000 employees worldwide through October, according to Business Journal research.
The two companies compete in very different sectors, Ingram entrenched in a razor-thin distribution business and Broadcom a leader in intellectual property and the high-margin chip sector.
Broadcom specializes in communication chips—which power Bluetooth, Wi-Fi, near-field communication and RF radio applications in some of the world’s most popular electronics made by the likes of Apple, Samsung and HTC. It also has strong business lines in broadband, set-top boxes, and data center and networking connectivity.
Its local operation at University Research Park will take the brunt of the cuts, losing about 29% of its workforce. An additional 180 employees were cut in San Jose, Santa Clara and Sunnyvale.
The layoffs in Irvine and elsewhere had been expected since the companies announced the sale in May.
Broadcom for months indicated that plans for a new, five-building campus next to Orange County Great Park would not be altered with the sale, but construction on the first phase on the 73-acre development site seems smaller than originally advertised.
There appears to be little if any work done on the fourth core office building, and at a fifth, smaller low-rise building planned near the entrance of the campus just off Alton Parkway.
The Ingram deal must be approved by a majority of its shareholders and two-thirds of Tianjin shareholders, as well as regulators in the U.S., Europe and China.
The transaction doesn’t include a go-shop period, essentially a window when others may bid, but includes termination fees. Ingram Micro will have to pay Tianjin $120 million if the deal is terminated “under certain circumstances,” and Tianjin will have to pay Ingram Micro an escalating fee between $200 million and $400 million if the deal isn’t closed within seven business days, if escrow isn’t funded, or if regulators block the transaction, among other conditions.
