Tianjin Tianhai Delays Vote on Ingram Micro Deal

The Shanghai Stock Exchange asked for more details about Tianjin Tianhai Investment Co. Ltd's pending $6 billion acquisition of Ingram Micro Inc., causing the Chinese buyer to delay a shareholder meeting to approve the deal.

The exchange on July 15 sent an inquiry letter to Tianjin Tianhai, a subsidiary of Chinese conglomerate HNA Group, asking the buyer to clarify terms of the deal. The letter has caused Tianjin Tianhai to delay to July 29 its planned shareholder meeting to approve the deal, according to a company press release.

The exchange asked the company to disclose how it is funding the acquisition of Ingram Micro, an Irvine, Calif.-based distributor of personal computers, printers and other hardware. The exchange also wanted to know details about any postdeal exit plan for a Chinese co-investor and other risks from the transaction, as well as whether the company foresaw issues involving regulatory approval.

Ingram and Tianjin Tianhai announced the deal in February, part of a surge of Chinese acquisitions early this year. Ingram negotiated a termination fee as high as $400 million if regulators block the company, a marine shipping subsidiary of HNA Group, from closing the deal. Ingram insisted that the money be deposited in an escrow account with the Americas unit of Deutsche Bank AG, to ensure it would have access to it if the deal failed, according to people close to the transaction.

The deal is one of about $178 billion of cross-border acquisitions by Chinese companies announced so far this year, according to Dealogic. Of those, some $24 billion have been withdrawn, either for regulatory reasons, or because Chinese buyers couldn't raise the cash.

In the most prominent such withdrawal, Anbang Insurance Group Co. surprised Starwood Hotels & Resorts Worldwide Inc. in March by walking away from its proposed $14 billion bid for the hotel chain. The Chinese insurer never gave a full, public explanation of why it abruptly dropped its pursuit after the company sparked a bidding war with Marriott International Inc. Marriott ended up buying Starwood for $13.6 billion.

In its letter, the stock exchange asked Tianjin Tianhai to disclose whether bank loans used to fund the deal will curb the company's financial performance and how they plan to repay the debt.

The stock exchange also noted Ingram Micro's net profit fell sharply in the first quarter, and that its net profit margins from 2013 to 2015 were lower than its peers, requested explanations for the performance shortfalls.

Ingram's first quarter sales dropped 12% from a year ago, as demand fell. Its operating income tumbled to $38 million from $98 million, a year ago.

The exchange asked how Ingram Micro's credit rating would change after the deal, and for more details about change of control provisions, as well as about a shareholder lawsuit filed in May by an Ingram stockholder in Delaware, that sought to terminate the deal.

The bourse also asked about the role of China International Capital Corp, an investment bank, in the transaction.

Trading of Tianjin Tianhai's shares has been suspended since February.

Ingram and Tianjin Tianhai didn't return requests for comment. An HNA spokeswoman said the group couldn't immediately comment.

Amy Or Contributed to this article.

Write to Vipal Monga at [e-mail] and Kane Wu at [e-mail]

(END) Dow Jones Newswires

July 20, 2016 16:05 ET (20:05 GMT)

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