Ace information technology (IT) distributor
Ingram Micro Inc.
) finally had the opportunity to close the acquisition of
), a leading distributor of wireless devices, for a cash
consideration of $840.0 million. The deal, which was announced in
July, received an approval from the European Union last week.
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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
manufacturers. 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, with more than
25,000 customers. Ingram reported $5.2 billion in revenue (up 46.0%
year over year) and earnings per share of 71 cents (up 65.0%) in
With Brightpoint, Ingram will now be able to broaden its
distribution network and augment its high-margin Logistics
business. The expansion of Ingram's customer base in the mobile
market and its geographical reach will be a bonus.
Ingram has been focusing 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 revenue.
Brightpoint's offerings will be complementary to Ingram's
portfolio, but customer overlap is negligible, which is a very big
positive. The acquisition is expected to be accretive to Ingram's
earnings per share by 18 cents in 2013 and 35 cents in 2014. The
similar lines of business will attract less integration time and
costs. Apart from this, Ingram expects a cost synergy of around
$55.0 million by the end of 2014.
Despite things being in Ingram's favor, Brightpoint's major
customer loss and high debt burden concern us.
Though we have a long-term Neutral recommendation on the stock,
significant European exposure and debt burden lead to a Zacks #4
Rank, implying a short-term Sell rating.