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  • Apr 18, 2014
  • Updated: 7:08am

Lenovo sets sights on Europe

PUBLISHED : Thursday, 02 June, 2011, 12:00am
UPDATED : Thursday, 02 June, 2011, 12:00am

Lenovo Group said it planned to accelerate its expansion in Europe after securing a deal for Germany's Medion, which makes personal computers and consumer electronics products and also provides mobile communications services.

The Chinese computer giant has made a conditional offer to acquire a controlling stake in Medion for up to Euro466 million (HK$5.2 billion) to Medion shareholders, who are led by founder and chief executive Gerd Brachmann.

Wong Wai-ming (pictured), Lenovo's chief financial officer, yesterday said that as part of the total transaction, the company would pay Euro231 million, 80 per cent of which would be in cash and the rest in Lenovo shares, to Brachmann under a separate agreement.

Lenovo's offer to the remaining shareholders of Medion was at Euro13 per share in cash.

The deal is expected to close this August and give Lenovo between 55 per cent and 80 per cent stake in Frankfurt-listed Medion. If completed, the transaction would be Lenovo's second-largest acquisition after it closed the US$1.75 billion purchase of IBM's personal computer business on May 1, 2005.

Lenovo and Medion will continue to maintain their own product brands, while providing sales and support through existing channels.

Wong said the combined company would have more than a 14 per cent share in the German personal computer market and about a 7.5 per cent share in western Europe.

Both Lenovo's and Medion's boards have approved the transaction, which is subject to customary closing conditions and regulatory approvals.

'The acquisition is a great addition for Lenovo, which has been looking to enter the western European consumer market for some time,' said Eszter Morvay, a London-based research manager at market analyst firm International Data Corp (IDC). 'The company took a cautious approach in entering the market after it failed to purchase Packard Bell.'

Lenovo's plan to expand swiftly in Europe by acquiring personal computer supplier Packard Bell in 2007 was derailed after Taiwanese competitor Acer, through its United States-based Gateway subsidiary, sealed a deal to buy Packard Bell's parent company.

'Medion has a solid presence across the western European consumer PC market, ranking ninth in the first quarter of this year with a 4 per cent market share and 10th last year with a 3 per cent share,' Morvay said.

According to IDC, Lenovo had a 0.5 per cent market share in the same market last quarter, which was down from its 1.6 per cent share last year.

There appears to be plenty of work ahead for Lenovo as it integrates Medion. The German company sells more than 60 per cent of its personal computers in its home country.

'Outside Germany, Medion is strong in Austria and Belgium, but not really in the other [western European] countries,' Morvay said.

Lenovo's shares fell 3.28 per cent to close at HK$4.43 yesterday.

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