Lenovo expects all-clear for IBM, Motorola Mobility deals

PUBLISHED : Thursday, 03 July, 2014, 2:08am
UPDATED : Thursday, 03 July, 2014, 2:08am

Lenovo, the world's largest supplier of personal computers, is looking to clear all regulatory hurdles and complete its two biggest corporate acquisitions by the end of this year despite potential snags from Beijing and Washington's row over cyber-spying.

"We are making very good progress in obtaining approvals. There are no changes to our timetable," Lenovo chairman and chief executive Yang Yuanqing said yesterday after the company's annual shareholders meeting.

Hong Kong-listed Lenovo, which operates in more than 160 countries, is awaiting approval from regulators in the United States, mainland China and the European Union for its US$2.91 billion takeover of Google's Motorola Mobility operation, and the US$2.3 billion purchase of IBM's low-end server business.

The two transactions, announced separately in January, are subject to review by the Committee on Foreign Investments in the US (CFIUS). It is an inter-agency committee that assesses national security implications of mergers, acquisitions and takeovers that could result in foreign control of any US business.

"Hopefully, we can close both deals by the end of this year," said Yang, unfazed by news of US security concerns about the IBM transaction. Speculation has been rife that the recent indictment of five Chinese military officers for alleged industrial cyber-espionage against major US firms could add more scrutiny to Lenovo's deals.

Yang said Lenovo had no issues regarding security, considering its products are used by the US military as well as US federal and local governments. It also had first-hand experience with the CFIUS process when it bought IBM's personal computer business for US$1.75 billion in 2005.

In an interview, Washington-based Anne Salladin, the special counsel for national security, CFIUS and compliance practice group in the law firm Stroock & Stroock & Lavan, said Lenovo's IBM server business and Motorola Mobility deals were "tailor-made for CFIUS".

"They [CFIUS] would want to look at who are the end-users of those servers and whether those are used with sensitive government data. On the other deal, there are apparently patents purchased. I would imagine the government being interested to see if there are sensitive technologies involved," Salladin said. She added that the committee does not publicly acknowledge any filing made before it.

Lenovo received good news last Friday when the European Commission approved its Motorola Mobility purchase under the EU Merger Regulation. The commission said the deal "would not raise competition concerns" in smartphones and tablets.