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The country's biggest PC maker Lenovo said Thursday that it was optimistic about completing the purchase of IBM's PC business despite challenges in the US.
Lenovo's US$1.75 billion purchase -- the largest overseas acquisition by a Chinese company -- was cast into doubt after a trio of high-ranking Republican members of the US House of Representatives called for a full security review of the sale this week.
They reportedly feared the deal could threaten US security interests and help the transfer of military-related technologies to China.
"The acquisition is still going ahead as expected and there are no signs that the deal will fail," said Yang Yuanqing, president and chief executive officer of Lenovo.
"I don't think the deal will pose any threat to the US and we have not received any message from the US government that they will not approve it," Yang told reporters after 99 percent of shareholders endorsed it at an extraordinary general meeting in Hong Kong yesterday.
He said the deal would be beneficial for all and that Lenovo is confident of completing the deal by June.
The deal, already approved by US antitrust officials, also requires approval from the Committee on Foreign Investment in the US (CFIUS).
This is an administrative panel of security and economic agencies led by US Treasury Secretary John Snow. It is expected to decide by Saturday whether to give its approval or launch a full 45-day review, which would be subject to a final decision by the US president.
"We will fully cooperate with relevant authorities in the investigation," said Yang.
Shares of Lenovo finished flat at HK$2.10 yesterday. They had risen 7 percent to HK$2.175 on Monday as the media reported the takeover was called into question. But they are still well below the HK$2.675 level at which they last traded before the deal was announced in December.
"The market consensus is quite negative about the deal as the major problems with the PC market are tight margins and cutthroat competition," said JPMorgan analyst Johnny Chan.
BNP Paribas analyst Marvin Lo agreed: "If the deal were blocked by the US government, shares of Lenovo might rebound to HK$2.50-2.60 from the current HK$2.10 as investors generally do not welcome the deal."
JP Morgan has assigned an "underweight" rating to Lenovo's shares, with a target price of HK$2. If the deal receives approval from the CFIUS, Chan said the bank may consider further reducing the target price.
Lenovo's acquisition of IBM's PC unit will not only make it the world's third-largest computer maker but act as an important springboard for the Beijing-based company to expand overseas.
"Whatever the result, we will stick to overseas expansion plans and strive to establish Lenovo as a global brand," said Yang.
(China Daily January 28, 2005)
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