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Chinese computer giant Lenovo Group took another stride in its efforts to expand globally yesterday with the introduction of three strategic investors.
Hong Kong-listed Lenovo said Thursday that Texas Pacific Group (TPG), General Atlantic and New Bridge LLC had invested US$350 million in the firm, which announced in December the acquisition of IBM's personal computer unit for US$1.25 billion.
Lenovo will issue 2.73 million unlisted convertible preferred shares and unlisted warrants worth 2.37 million shares to the three private equity firms in exchange for US$350 million. The convertible shares will represent 13.4 percent of Lenovo's share capital on Wednesday and 10.24 percent, assuming the full conversion of the convertible shares and the issuance of 1.31 million shares to IBM after the close of the acquisition take place. If the warrants are also exercised, they will get 12.4 percent of Lenovo's share capital.
TPG will pay US$200 million, while General Atlantic and New Bridge will contribute US$100 million and US$50 million respectively.
TPG was a competing bidder with Lenovo for IBM's PC business, while General Atlantic has been a strategic adviser to Lenovo in the past year. New Bridge is an affiliate of TPG and another firm.
A total of US$150 million of the investment will be paid to IBM as part of the acquisition, which means the US information technology firm will get US$800 million in cash instead of the previous US$650 million. Lenovo will keep the remaining US$200 million for daily operations and other corporate uses.
"The investment does not only bring us capital needed for the acquisition and daily operations, but more importantly benefits our future operations," said Yang Yuanqing, president and CEO of Lenovo Group and to-be chairman of the new company formed by the merger of the existing Lenovo and IBM's PC unit.
He believed the directorship the three investors will get on Lenovo's board will strengthen its corporate governance and make the board truly global.
The three investors, mainly focused on the technology industry and previous partnerships with IBM, will also be of critical assistance to Lenovo in drafting and executing future strategies and facilitate the integration of Lenovo and IBM's PC unit.
Shares of the leading Chinese computer maker rose by 3.92 percent yesterday to HK$2.65 (34 US cents), after trading was suspended from last Thursday to yesterday.
Jeannie Cheung, an analyst with Credit Suisse First Boston Hong Kong Ltd, believed the investment by the three big-names showed a fresh confidence in the new Lenovo, in the face of a negative market reaction to its acquisition of IBM's PC unit.
She added their reputation and expertise will also help the new Lenovo in its listing on a US stock exchange, since floating the company's shares in the United States is a long-term goal.
However, Yang said yesterday that Lenovo currently has no plans to make a US listing, even though this is considered a natural step for a company with global ambitions.
(China Daily April 1, 2005)
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