A private equity fund formed by Lehman Brothers and IBM has agreed to buy a
stake in a Chinese software company for HK$132 million, a move that could boost
the fledgling local software industry.
The investment also underscores the growing desire of Western private equity
groups to buy high-growth Chinese companies created by the country's booming
Under the deal, Lehman Brothers and IBM will buy a 7.7 percent stake of Hong
Kong-listed Kingdee International Software Group Company Limited, headquartered
in Shenzhen, a boom town in South China's Guangdong Province.
IBM also announced it would form a global alliance with
Kingdee, which will help the firm grow into a global software player, the two
companies said yesterday.
Kingdee, one of China's largest software companies, develops enterprise
management software and e-business application solutions in China and the
The investment could give a Kingdee a leg-up in competition with domestic
rival Ufida software, formally known as Ufsoft, as well as Germany-based SAP and
Kingdee reported a turnover of 611 million yuan in 2006, up 16 percent
year-on-year. Profit surged by 35 percent to 97 million yuan in the same period.
China's fledgling software market grew 17.8 percent year-on-year in 2006 and
the information technology (IT) service market increased 26.3 percent, according
to Beijing-based CCID Consulting.
Kingdee competes in what might be the most profitable segment of China's
software market. The enterprise software it develops is largely piracy-free.
IBM will work with Kingdee to redesign its software products to tap into the
The collaboration will enhance Kingdee's competitiveness, said company
Chairman Xu Shaochun.
The Kingdee purchase marks the first major investment for "The China
Investment Fund" formed by Lehman Brothers and IBM last year. The $180 million
private equity fund was designed to take up minority stakes in private and
public companies in China.
Charles P. Wu, managing partner of The China Investment Fund and
vice-president of IBM Greater China Group, called the Kingdee deal "a new
business strategy for IBM in China".
"It should exert significant influence on future investments and business
cooperation for IBM in China. Furthermore, this collaborative approach will
become a key component of IBM's China strategy," he