BrightPoint Inc.'s decision to sell to a California company for $840 million followed a tumultuous five months for the Indianapolis cell phone distributor during which its stock price fell by more than half.
Analysts said BrightPoint's sale to Santa Ana-based Ingram Micro Inc. makes sense in light of the soft cell phone market and the company's recent struggles.
Ingram Micro, the world's largest technology distributor, agreed to pay $650 million in cash and assume $190 million in BrightPoint debt. The per-share price—$9—is a 66-percent premium to BrightPoint's closing price on Friday. But it's well below the stock's 52-week high of $12.05 reached Feb. 1.
BrightPoint lowered its earnings forecast in late February following the loss of major customer Cricket Communications Inc. BrightPoint said it handled 6.8 million wireless devices last year on behalf of Cricket.
The company also has been hurt by the sinking fortunes of Research in Motion Ltd., the Toronto-based maker of the Blackberry. RIM had accounted for about 10 percent of BrightPoint's distribution business.
BrightPoint announced the Ingram Micro deal early Monday morning, a short time after releasing a statement saying it expected to post a 2-cent-per-share loss in the second quarter. In the statement, the company withdrew its prior financial guidance for the rest of the year.
BrightPoint shares surged Monday morning and were trading at $8.80 close to midday.
BrightPoint handled a record 112.2 million devices in 2011. Becoming part of the far-larger Ingram could help BrightPoint push that volume to another record this year, according to an analyst tracking the company who declined to be identified.
“It’s definitely a tough business environment out there and I think scale and global reach is becoming increasingly important,” he said. “BrightPoint does have good global scale but Ingram will take it to another level.”
BrightPoint has about 1,300 employees in the Indianapolis area, most of them in Plainfield, and about 4,000 worldwide.
BrightPoint and Ingram Micro did not say what impact the deal would have on BrightPoint's presence in the Indianapolis area or on the company’s overall work force. But the merged companies expect “to realize annual cost synergies and efficiencies in excess of $55 million by 2014," they said in a joint statement.
Executives of both companies declined to be more specific in a conference call with analysts late Monday morning.
“We’re considering all factors of potential synergies and integration opportunities, but we’re not going to go into further detail,” said Bill Humes, Ingram’s chief operating and financial officer. “We will update further going forward, but I do believe there are some great opportunities.”
Plainfield Town Manager Rich Carlucci said he hopes his community fares well in the acquisition and said BrightPoint's ownership of two large warehouses there should help its cause. One is in AirTech Park and the other in AllPoints Midwest.
“I would assume those are positives,” he said, “but we’ll have to see how this shakes out.”
BrightPoint laid off an undisclosed number of employees in March and decided not to fill another 120 open positions. BrightPoint has warehouse and distribution operations in Plainfield, where the company was founded in 1989. The company's headquarters is on the northwside side of Indianapolis.
Perhaps the biggest blow to BrightPoint came in late May when Research in Motion said it wouldn’t turn a profit in the current quarter and that it had hired investment bankers to explore strategic options, suggesting the company might be sold.
BrightPoint’s stock price dropped 21 percent the week following RIM’s announcement.
Completion of the Ingram deal would cause Indiana to lose one of its six Fortune 500 companies. BrightPoint ranks 463rd on the list, with $5.2 billion in revenue. Ingram, with $36.3 billion in revenue, ranks 81st.
The acquisition must be approved by BrightPoint shareholders, a step that is likely to occur in the third quarter. The deal should close by the end of the year.
BrightPoint founder, chairman and CEO Robert J. Laikin, 48, would remain with the merged company in a senior advisory role to Ingram CEO Alain Monie.
BrightPoint senior executives Mark Howell, Bruce Thomlinson, Anurag Gupta and Vincent Donargo have “committed to senior roles within the new organization,” the companies said.
BrightPoint went public in April 1994.
As a child, Laikin dreamed of leading a public company and was among the city’s youngest chief executives at the time of the initial public offering.
He launched his first company, Tickets Up Front, while pursuing a business degree from Indiana University. He quit college to run the company, which launched in 1985.
An offshoot, Tickets and Travel, followed in 1986, which grew to become one of the city’s largest travel agencies.
But in the spring of 1986, a man walked into Laikin’s Landmark Center office and changed his life, Laikin recalled in an IBJ interview a decade later. Arnie Goldberg, a salesman for Hellyer Communications Inc., pulled out a 25-pound briefcase and showed Laikin an early-model cell phone.
“I got real excited about the product,” Laikin said then. “He let me use it for a few days, and I said I have to have one—because I was traveling all the time and always in different cities, and it was an exciting new product.”
That chance meeting ultimately led Laikin to launch Wholesale Cellular USA Inc., later renamed BrightPoint.