Three US private equity firms have confirmed that they will invest $US350 million in China's Lenovo Group to help fund its takeover of IBM's PC business. Trading of Lenovo's shares on the Hong Kong Stock Exchange was suspended for several days on rumours of the deal.
Texas Pacific (contributing $US200 million), General Atlantic ($US100 million) and Newbridge Capital ($US50 million) will collectively own about 10 per cent of Lenovo when their investment deal closes. If they exercise options included in the deal, their ownership stake will rise to 12 per cent.
Lenovo plans to use $US150 million of the investment to finance its purchase from IBM. The remaining $US200 million is earmarked for general working capital.
IBM announced in December that it would sell its PC business to Lenovo, a deal valued at about $US1.75 billion including cash, equity, and the assumption of balance sheet liabilities.
Lenovo said it expected the deal to close in the second quarter of this year.
The arrangement with the three investment firms slightly reduces IBM's overall ownership stake in Lenovo, which will now be about 13 per cent.
IBM's voting stake would remain the same, Lenovo said. The deal gave it cash as well as access to the firms' expertise in assisting technology companies.
"With rich experience helping companies integrate operations, their participation in the new Lenovo will further ensure a smooth transition period and stable development in the future," Lenovo Chief Executive Officer, Yuanqing Yang.
The three companies each have extensive holdings in the technology industry.
Texas Pacific Group is one of seven firms participating in the $US11.3 billion private buy-out of SunGard Data Services announced this week. Its other investments include Business Objects and Seagate Technology.
General Atlantic has invested in China for five years, where it has stakes in semiconductor company, Vimicro, and networking and services firm, Digital China.
Newbridge Capital is a Texas-based firm (established in part by Texas Pacific) that focuses its investments on Asia. Its portfolio includes Internet services company, HiChina, and network services firm, Zoom Networks.