Lenovo shares jump on report of IBM deal hurdle
(China Daily)
Updated: 2005-01-25 17:12

Shares of China's biggest PC maker, Lenovo Group, jumped yesterday on a report that its US$1.25 billion deal to buy IBM's PC business may be running into trouble over US security concerns.

"The market consensus is quite negative on the deal, so if it doesn't go through then everything is back to normal," said BNP Paribas analyst Marvin Lo. "It's a rather embarrassing reason" for the rise in the share price.

Lenovo, which announced the deal in December, saw its shares advance 7.41 per cent to HK$2.175. They are still well below the HK$2.675 level where they last traded before the IBM deal was announced.

On Sunday, Bloomberg reported that the deal might be held up by US regulators over national security concerns relating to an IBM facility in North Carolina.

According to the report, citing unnamed sources, members of the Committee on Foreign Investments in the United States were expressing concerns that China might use the facility to engage in industrial espionage.

Lenovo spokeswoman Alice Li said her company "continues to fully cooperate with the relevant authorities".

Investors and analysts have fretted over the deal since its announcement, concerned about Lenovo's lack of experience running a business outside China and financial weakness in IBM's loss-making PC division.

"If they really cancel the deal, this will be in the best interest for the market," said Herbert Lau, research director at Celestial Asia Securities. "It's a difficult deal because they have to merge two different cultures."

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