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)