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HNA agreed to acquire Ingram Micro Inc. (NYSE:IM) for $6 billion, the largest Chinese takeover of a US information technology company. Ingram Micro helps businesses “realize the promise of technology.” Ingram Micro delivers a full spectrum of global technology and supply chain services to businesses around the world. The deal closing is still pending. “After the transaction, Ingram Micro would become the largest member enterprise of HNA Group in terms of revenue, and facilitate the internationalization process of the group. With the help of Ingram Micro, HNA Group would have access to business opportunities in emerging markets, which have higher growth rates and better profitability. Furthermore, the addition of Ingram Micro would help the logistics sector of HNA Group transform from a logistics operator to a supply chain operator, and provide one-stop services while improving efficiencies,” said Adam Tan, vice chairman and CEO of HNA Group. Pactera provides global IT consulting, solutions, and outsourcing services to a range of multinational firms in Greater China, the United States, Japan, Europe, Singapore, Australia, Malaysia, Indonesia, and Mauritius. Pactera was formed through the merger of China-based IT services firms HiSoft and VanceInfo in 2012. In January 2014, Pactera acquired Swiss-based IT software company Innoveo Solutions AG. In January 2016, Pactera acquired New York-based digital agency Blue Fountain Media. Blackstone led a consortium which acquired and privatized Pactera in March 2014 for $625 million, according to international law firm Orrick, which advised Pactera on its sale at the time. The Blackstone-led consortium included members of Pactera’s senior management team and GGV Capital, a Silicon Valley-based venture capital firm focused on multi-stage investments in the US and China. HNA’s acquisition price is said to be about $675 million in cash, with an enterprise value of $930 million, including debt, according to The Wall Street Journal, giving Blackstone a return of more than 1½ times its initial investment. “We expect Pactera to become a consolidated subsidiary of HNA Group once the transaction is complete,” said S&P Global Ratings credit analyst Leo Hu. “HNA Group or its affiliates will replace Blackstone as the ultimate parent of Pactera, with controlling ownership. We will then assess the creditworthiness of HNA Group, and Pactera’s strategic status within the group, while assessing the impact of the transaction on Pactera’s credit profile.” S&P Global Ratings said that it had placed its ‘B+’ long-term corporate credit rating and ‘cnBB’ long-term Greater China regional scale rating on Pactera on CreditWatch. In 2015, Pactera reported revenue of $777 million, according to Moody’s. At June 30, 2016, Pactera reported cash of $52 million and accounts receivables totaling $338 million. Since the first quarter of 2015, Pactera has reported operating profit margins below 3%, as against previous levels of 5%-10%. Moody’s had earlier expected that Pactera’s profitability would recover starting at end-2015, but the credit rating service noted in late August that, “Pactera has continued to face a high cost base and increasing working capital needs in China. Persistently weak operating margins and working capital outflows have negatively affected Pactera’s cash flow generation and raised its short-term debt.” As a result, Moody’s downgraded the corporate family rating of Pactera to B2 from B1. “The review for downgrade reflects our concerns over Pactera’s ability to meet the potential notes repayment of $275 million, given that the announced exit of The Blackstone Group, a shareholder with a majority stake, will trigger the change of control clause and mandatory notes redemption offer,” said Lina Choi, a Moody’s vice president and senior credit officer, who is also the lead analyst for Pactera. HNA, a leader in aviation and tourism, was founded in 1993. Over the past two decades, it has grown from a local aviation transportation operator into a multinational conglomerate encompassing Aviation, Holdings, Tourism, Capital, Logistics and EcoTech. HNA Group aspires to become one of the top 50 companies in the world by 2030, it says. In 2015, HNA had revenues of nearly RMB190 billion ($28.6 billion), total assets of over RMB 600 billion ($90 billion) and employed nearly 180,000 employees worldwide. HNA is headquartered in Haikou, Hainan, China. In early August, HNA Group agreed to invest $336 million in San Francisco-based RocketSpace, a leading technology accelerator campus and co-working space for high-growth startup, in a strategic joint venture deal to fuel RocketSpace’s global expansion, including China. A few days later, HNA’s subsidiary Hainan Airlines Co. Ltd. acquired a 24% stake in Brazil’s third largest airline Azul SA for $450 million, becoming its largest single shareholder. HNA Ecological Technology Group (EcoTech), founded in March 2016, provides IT services, online payment, virtual communication, cross-border e-commerce, VC consultation and project incubation services for enterprises through a multi-sphere product system. HNA EcoTech has set up operations and R&D centers in Beijing, Haikou, Xi’an, Hong Kong and San Francisco, and aims at providing a superior cloud-based user experience, including big data, internet of things (IoT), e-commerce, fin-tech, and artificial intelligence.]]>