New | Lenovo halts trading as speculation on IBM server deal heats up

Trading in the shares of Lenovo, the world’s largest supplier of personal computers, was halted Thursday morning as speculation swirled about the company’s possible acquisition of International Business Machines’ low-end server business.

That notice to the Hong Kong stock exchange was posted less than 15 minutes before the market opened Thursday.

In the company’s regulatory filing, Lenovo chairman and chief executive Yang Yuanqing said trading was halted “pending the release of an announcement in respect of a disclosable transaction”.

Lenovo could end up paying as much US$3 billion to buy IBM’s low-end server business, according to recent estimates. Last year, negotiations between the two companies reached an impasse over price.

If that deal proceeds, it would be Lenovo’s biggest-ever acquisition. In 2005, the Chinese technology giant purchased New York-based IBM’s personal computer business for US$1.75 billion.

“I think the chances of a (server) deal happening this time around are higher, and probably at better pricing for Lenovo,” Alberto Moel, a senior analyst at Bernstein Research, said on Tuesday.

Moel estimated that transaction could be priced between US$2.5 billion to US$3 billion, which is lower than the US$5 billion valuation that IBM reportedly wanted to seal the deal last year.