Ingram Micro Inc. Makes Bid to Buy Intelligent Electronics, Inc.

Ingram Micro Inc. has made an offer to buy Intelligent Electronics Inc.'s distribution business for $70 million to $90 million, while IE continues to seek offers from other players, according to a report by Computer Reseller News Section Editor Eric Hausman.

Ingram is looking to buy IE's Reseller Network Division, which posted $2.4 billion in sales for the first three quarters of 1996, said sources close to both companies.

No other suitor has made a concrete offer just yet, although others, from both inside and outside the channel, are expected soon, the sources said. IE is expected to make a decision within the next few weeks.

Ingram, Santa Ana, Calif., would not comment, and repeated calls to IE Chairman Richard Sanford were not returned.

IE President Michael Norris would not comment on whether IE is talking to Ingram and would only reiterate what he has said since IE revealed it hired financial advisors in late January.

"We're still engaged in the process of looking at alternatives for the company. There is nothing definitive or imminent," Norris said.

Noted Hausman, "If Ingram were to buy IE's Reseller Network Division, the $12-billion powerhouse would be able to add more than $3 billion in sales, as well as gain access to the business of IE's Intelligent Systems Group, a network of resellers serving large accounts. Ingram has been trying to build such a program on its own. In addition, Ingram may be able to obtain some of IE's configuration and channel assembly capabilities. Those pieces may be the most important elements of the deal."

But whether a deal can be put together still remains to be seen. "If they paid a fair price, it would be a very smart, strategic move for Ingram," said Martin Wolf, president of Martin Wolf Associates, which assists resellers in making transactions.

Channel observers said the Ingram offer is low but does make sense considering some recent sales. Merisel Inc. recently sold its $1 billion franchise and aggregation business for about $20 million, according to sources. IE's distribution business is about three times bigger and includes configuration and the Intelligent Systems Group, so a higher price would be expected.

Kevin McCarthy, senior vice president at NatWest Securities Corp., New York, said Wall Street will look favorably at a deal to sell IE, which has a market capitalization of about $120 million. "Anytime you consolidate the weaker players, it's a net positive for the channel," he said.

It is unclear what would happen to the rest of IE's business if it were to sell its distribution unit. IE, once a channel power itself, would be left with the unprofitable company-owned XLSource unit and subsidiary XLConnect Solutions Inc., which posted $115 million in sales last year. The most likely scenario would be to sell XLSource or build it up with XLConnect, which has a market cap of $106 million, analysts and industry executives said.

And channel executives who have spoken to IE, Exton, Pa., regarding a possible deal said something needs to happen soon. "There's a process under way in which they'd like to sell the company," said one executive. "I think they're under some pressure to make something happen soon."

Concerned about implications for their businesses, IE's reseller advisory council held a special meeting with Norris and Tim Cook, the Reseller Network Division's chief operating officer, last week. Resellers said little definitive information was given regarding a possible sale. Resellers also said IE is delaying its plans to make dealer acquisitions, although Norris said that process continues to progress.

In addition, IE this week will unveil it has completed guidelines for cooperation between its dealers, XLSource and XLConnect.

Published by CMP Media Inc., Computer Reseller News has a circulation of more than 115,000 and reaches influential readers from Wall Street to Silicon Valley with the product trends and industry news needed to sell comprehensive technology solutions.

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SOURCE: CMP Media Inc.

CONTACT: Robert Faletra, 516-733-8612, Robert DeMarzo, 516-733-8641, or
Eric Hausman, 516-733-8576, all for Computer Reseller News