5 Things You Need To Know About Ingram Micro's HNA Relationship

In a letter to partners, Ingram Micro CEO Alain Monie said “regardless of any issues HNA may experience” that “will not and cannot change” how Ingram Micro does business, or how partners do business with the distributor.

‘Rumors’ Of A Chinese Takeover

Ingram Micro parent company HNA Group, which is primarily an air carrier, has been hard hit by travel bans related to the coronavirus, leading to speculation that the local Chinese authorities could nationalize the company.

However, in a Feb. 25 letter to partners, Ingram Micro CEO Alain Monie said “regardless of any issues HNA may experience” that “will not and cannot change” how Ingram Micro does business, or how partners do business with the distributor.

“You may have seen the latest rumors and speculation related to the financial difficulties faced by HNA Group,” he wrote. “The Ingram Micro executive team and I want to assure you that it remains irrelevant for us at Ingram Micro and we want to repeat some important facts about how we operate our organization that will not and cannot change regardless of any issues HNA may experience.”

Here are five things you need to know about Ingram Micro’s HNA relationship, according to Monie.

Uncle Sam Is Watching

HNA’s ownership of Ingram Micro is governed by the U.S. Department of Treasury’s Committee on Foreign Investments to the U.S. or CFIUS. According to its website, CFIUS is authorized to review transactions involving foreign investment in the United States and certain real estate transactions by foreign persons, in order to determine the effect of such transactions on the national security of the United States. Changes to the laws in 2018, and in 2020, gave the president more authority to step in under CFIUS if there was a threat to national security.

“Any change to Ingram Micro's ownership to a foreign entity would require approval by the U.S. Government,” Monie wrote in his letter to partners. “We believe it is extremely unlikely the U.S. government would approve the transfer of ownership of Ingram Micro to a Chinese government entity. Additionally, as we have for the past three years, we continue to operate in close cooperation with U.S. Government agencies designated to ensure that HNA's ownership of Ingram Micro poses no threat to U.S. national security interests.

Ingram Micro’s Business Remains Strong

“We've faced rumors and noise around HNA's financial difficulties for a few years and this will likely continue, especially in the recent weeks as the coronavirus outbreak has impacted significantly one of the major businesses of HNA: their airline business,” Monie wrote. “But on our side, we have executed incredibly well in the face of this noise, delivering a second straight year of strong financial performance, including strengthening our balance sheet.”

Ingram Micro ‘Cannot Be Integrated’ With HNA

“Ingram Micro operates as a separate stand-alone company that is not and cannot be integrated with HNA. This is mandated by the U.S. Government and has effectively insulated our company from HNA to minimize impact from any issues that may be experienced by HNA or its affiliates. Separately, under the agreements with our lenders, we maintain a fully independent debt portfolio to fund our business with absolutely no reliance on guarantees or any type of support from HNA.”

Ingram Micro’s Balance Sheet ‘Protected’ From HNA Debt

“Additionally, any debt at the HNA level has no recourse to Ingram Micro or our financing facilities, therefore, financial difficulties or a default by HNA cannot impact Ingram Micro. Finally, our balance sheet is also protected so that the anyway Ingram Micro is allowed to send money to HNA is through the payment of dividends, which are limited by our financial covenants.”

Ingram Micro’s Commitment to Partners Remains In Place

“What all this means for us - and for you - is that any potential change in ownership to a foreign entity does not and cannot impact this separateness required by the U.S. Government. Furthermore, our current corporate governance and financial protections will always continue to be in effect. As we committed in February 2016 when we initially agreed to be acquired by HNA, our senior leadership, strategies, business operations and dedication to our relationship with you, our valued partner, all remain the same. We appreciate the confidence you have extended to us over the years and look forward to continuing to build on our relationship.”