Lenovo, China's largest personal computer maker and Olympic TOP sponsor, bought IBM's PC division yesterday to become the world's third largest PC giant.

One of the biggest Chinese overseas acquisitions ever at US$1.25 billion, the deal will be completed with US$650 million in cash and US$600 million in Lenovo stock, according to Lenovo sources.

Lenovo will also assume about US$500 million of net balance sheet liabilities from IBM, which means the total transaction will reach US$1.75 billion if the IBM debt is added in.

Under an agreement reached yesterday in Beijing after 13 months of negotiations, Lenovo will acquire IBM's entire global desktop and notebook computer business, including research and development and manufacturing. The firm will be entitled to use IBM's brand for five years as well as its global marketing and sales network.

The two computer market players have formed a strategic alliance in PC business worldwide, in which IBM will take 18.9 per cent of the new Lenovo's equity stake, as the second-largest share-holder, upon completion of the transaction in the second quarter of 2005, with Lenovo taking about 45 per cent.

"The historic moment marks a strategic breakthrough in our efforts to establish our PC business overseas," said Liu Chuanzhi, current chairman of Lenovo Group. "The blending of IBM's penetrable marketing and sales network with Lenovo's high efficiency in product design and manufacturing, as well as good understanding of China's huge potential market, promises a stunning success."

IBM will provide service and financing consulting support to Lenovo, while Lenovo will be the "preferred" supplier of PC products to IBM, enabling IBM to provide its small and medium business clients with a full range of personal computing solutions.

The new Lenovo group will base its PC business' worldwide headquarters in New York, with principal operations in Beijing and Raleigh in North Carolina of the United States, and sales offices throughout the world.

Stephen M Ward, Jr, currently IBM's senior vice-president and general manager of IBM's Personal Systems Group, will serve as CEO of Lenovo, post-transaction. Yang Yuanqing, current vice-chairman, president and CEO of Lenovo, will serve as chairman of the new Hong Kong-listed company.

The acquisition expands Lenovo's PC business fourfold, giving it an annual revenue of approximately US$12 billion and an annual output of 11.9 million units, based on 2003 results, the statement indicated.

In light of business continuity, the two companies will still keep their PC business operating separately for marketing and sales in the transaction adjustment period, which is expected to last 18 months, implied Yang.

Yang also hinted that the new Lenovo would launch a joint PC brand name, but details of the name were not given as the issue is still under negotiations between Lenovo and IBM.

(China Daily)

liabilities : anything that is owed to someone else（负债，债务）