Ace information technology (IT) distributor
Ingram Micro Inc.
) has signed an agreement to acquire
), a leading distributor of wireless devices, for a cash
consideration of $840.0 million. The purchase price, including
Brightpoint's $190.0 million debt burden, equates to $9 per
Brightpoint's common share and reflects a 66% premium over last
The Brightpoint Story
Brightpoint specializes in providing wireless communications
technology globally. The company also provides customized logistics
services to mobile network operators, mobile virtual network
operators, resellers, retailers and wireless equipment
In April, the company reported a modest first quarter, with the
bottom line missing the Zacks Consensus Estimate by 5 cents, and
the top line comfortably beating the same. Looming macro
uncertainties and a major customer loss in its high-margin
Logistics business resulted in the earnings miss.
Brightpoint has tie-ups with heavyweights such as
Research In Motion Ltd.
), HTC Corp and
). It has also been winning deals from the likes of
MetroPCS Communications Inc.
Sprint Nextel Corp.
The company has sales operations in 75 countries, accumulating
25,000 customers and generating $5.2 billion in revenue (up 46.0%
year over year) and earnings per share of 71 cents (up 65.0%) in
A good deal for Ingram
Ingram's intention was to broaden its distribution network and
augment its high-margin Logistics business, to which Brightpoint's
offerings will fit in perfectly. The expansion of Ingram's customer
base in the mobility market is a bonus.
Ingram has been increasing focus on its Logistics business. To
make the business more profitable, Ingram has resorted to the
elimination of unprofitable lines of business, while concentrating
on select contracts and the acquisition of new clients. The
addition of Brightpoint will help boost Ingram's Logistics
Brightpoint's offerings will be complementary to Ingram's
portfolio, but customer overlap is negligible, which is a very big
positive Moreover, lesser the integration time and cost would make
the transaction accretive to Ingram's earnings per share by the
beginning of 2013.
The deal looks beneficial for Ingram, but Brightpoint's major
customer loss and weak guidance are concerns. Also, Brightpoint
will add to Ingram's existing level of debt.
Though we have a long-term Neutral recommendation on the stock,
significant European exposure and debt burden lead to a Zacks Rank
#4, implying a short-term Sell recommendation.
BRIGHTPOINT INC (CELL): Free Stock Analysis
INGRAM MICRO (IM): Free Stock Analysis Report
NOKIA CP-ADR A (NOK): Free Stock Analysis
METROPCS COMMUN (PCS): Free Stock Analysis
RESEARCH IN MOT (RIMM): Free Stock Analysis
SPRINT NEXTEL (S): Free Stock Analysis Report
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