Tech Pacific sale to Ingram mooted

The prospect of the country's biggest IT distributor being swallowed up by a local rival a fifth its size is a possibility as e-commerce causes consolidation in the distribution business.

The prospect of the country's biggest IT distributor being swallowed up by a local rival a fifth its size is a possibility as e-commerce causes consolidation in the distribution business.

The Asia-Pacific head of $US30 billion distributor Ingram Micro, Hans Koppen, doesn't rule out buying Tech Pacific, although it's not clear whether Tech Pacific is for sale.

Singapore-based Koppen was in the country last week to look over the operations of Ingram Micro New Zealand, which is 70% owned by the US company. With sales of about $60 million a year, the New Zealand operation ranks third or fourth in the local distribution market, which is dominated by $300 million Tech Pacific.

Tech Pacific is "in a little limbo", according to Koppen, since Dutch owner Hagemeyer said in November that it is considering selling or taking the IT distribution business public.

But Tech Pacific New Zealand managing director Tony Butler disputes the company is in limbo, saying it is proceeding with major infrastructure projects. They include creation of a new version of its TechLink website and replacement of a legacy accounting system with ERP system Intentia, on which Hagemeyer is standardising.

Butler says the question of selling the company or floating it is being examined by merchant bank Salomon Smith Barney, and he's not able to say how far that process has gone. He's unsentimental about what happens to the company structure, saying that distributiors stand or fall by relationships with vendors and customers.

"What we're called doesn't matter. What distribution companies own are the satisfaction of staff, vendors and customers, and those are interlinked."

Tech Pacific has operations in eight Asia-Pacific countries and, while the giant of the New Zealand market, its total revenue of about $3 billion is a fraction of Ingram Micro's.

Hagemeyer chairman Rob ter Haar said last November that Tech Pacific has "an impressive history" of sales and profit growth and its prospects remain impressive. But whereas Hagemeyer wants to be a leader in value added distribution to the industrial and construction markets, Tech Pacific is a broad-based IT distributor.

"An acquisition in this region is my responsibility but the final decision rests with the board," Koppen says. "Everything is possible," he says, in relation to buying Tech Pacific, "but would it make sense?"

Koppen speculates that a sale price could be high in what is no longer a glamorous business. But he also believes it's inevitable there be a thinning of distributor ranks as vendors seek to minimise the number of e-business relationships they have.

He is impatient to expand the company's share of the New Zealand market, believing that critical mass won't be reached until Ingram Micro is doing about $120 million of business here.

"You can get there by picking up niche players or players strong with particular vendors."

Tech Pacific would fall into the latter camp, as distributor of dominant PC brands Compaq and Hewlett-Packard. Ingram Micro sells both brands outside New Zealand but doesn't have agencies for them here.

Regardless of whether Ingram Micro ends up buying Tech Pacific, Koppen is confident the New Zealand operation will eventually get Compaq, HP and Cisco agencies.

"Increasingly we're working with vendors on a global basis. Worldwide we'd be the biggest customer of the big OEMs."

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