Lenovo Group, the leading PC brand in China and across Asia, and IBM have announced an agreement under which Lenovo will acquire IBM’s Personal Computing Division for $1.25 billion in cash and equity.
The acquisition will see the creation of the world’s third-largest PC business, bringing IBM’s enterprise-class PC technologies to the consumer market and giving Lenovo global market reach beyond China and Asia. Lenovo will have combined annual PC revenue of approximately $12 billion and volume of 11.9 million units, based on 2003 business results, a fourfold increase in Lenovo’s current PC business.
As part of the transaction, Lenovo and IBM, which will gain an 18.9 percent ownership share in Lenovo Group, will enter a broad-based, strategic alliance.As part of that business alliance, IBM will provide marketing support and demand generation services for Lenovo products through IBM’s existing enterprise sales force of approximately 30,000 professionals, and through IBM.com. Lenovo products will also be sold through IBM PC specialists that will join Lenovo. IBM Global Financing and IBM Global Services will be preferred providers to Lenovo for leasing and financing services, and for warranty and maintenance services respectively.
“Through acquiring IBM’s global PC business and forming a strategic alliance with IBM, Lenovo will absorb and integrate skills from both sides and acquire global brand recognition, an international and diversified customer base, a world-class distribution network with global reach, more diversified product offerings, enhanced operational excellence and leading-edge technology,” said Yuanqing Yang, president and CEO of Lenovo.
Lenovo Group will locate its PC business worldwide headquarters in New York, with principal operations in Beijing and Raleigh, North Carolina, and sales offices throughout the world. IBM will receive at least $650 million in cash and up to $600 million in Lenovo Group common stock. Additionally, Lenovo will assume approximately $500 million of net balance sheet liabilities from IBM.
The transaction is expected to be completed in the second quarter 2005 and requires the approval of Lenovo’s shareholders and review by relevant regulatory organisations.