Lenovo primed for new acquisitions after bond issue

Mainland computer maker adds US$1.5 billion to acquisition war chest after bond market debut

PUBLISHED : Thursday, 01 May, 2014, 1:27am
UPDATED : Thursday, 01 May, 2014, 1:27am

Lenovo, the world's largest supplier of personal computers, looks set to make more strategic acquisitions after raising US$1.5 billion from its bond market debut.

In its Hong Kong stock exchange filing yesterday, Lenovo said its bond issue was priced at 99.819 per cent with an annual interest rate of 4.7 per cent. The notes will mature on May 8, 2019.

The company on Tuesday entered into a subscription agreement for the issue and sale of its five-year notes with the syndicate of 15 banks serving as lead managers of its first foray in the bond market.

Those included Citigroup, Australia and New Zealand Banking Group, Bank of China, Barclays, Merrill Lynch, Credit Suisse, DBS, Royal Bank of Scotland and Standard Chartered Bank.

Yang Yuanqing, Lenovo's chairman and chief executive, said in the filing that the company "intends to use the net proceeds of the note issue for general corporate purposes, including working capital, and to fund any acquisition activities".

Lenovo, which operates in more than 160 countries, started this year on an ambitious acquisition spree to build up its enterprise server and smartphone operations.

The company announced in January separate agreements to buy the low-end server business of International Business Machines for US$2.3 billion in cash and shares, as well as Google's loss-making Motorola Mobility operation for US$2.91 billion with cash, shares and a three-year promissory note.

Alberto Moel, a senior analyst at Bernstein Research, said the net proceeds from Lenovo's bond issue would likely be used to make smaller purchases related to the firm's smartphone business.

"Lenovo's senior management has repeatedly said that if something interesting comes up, they'll buy it," Moel said, referring to the computer giant's appetite for further acquisitions.

While the bond market provides it with fresh funds, Lenovo has consistently maintained a strong cash position. In its financial third quarter to December 31, the company reported total bank deposits and cash amounting to US$3.82 billion. Lenovo has also put in place banking facilities for contingency purposes. At the end of December, the company had US$8.13 billion in total available credit facilities.

According to its filing, Lenovo will next make an application to the Hong Kong stock exchange for the listing of, and permission to deal in, the five-year notes. The stock exchange has confirmed that Lenovo's debt securities are eligible for listing, the company said.

Lenovo's share price fell 0.11 per cent to close at HK$8.82 in trading yesterday.