Extension sought on national security review of Lenovo's IBM server deal

Lenovo Group and International Business Machines have sought more time for a US national security review of Lenovo's planned purchase of IBM's low-end server unit, according to a person familiar with the matter.

The companies resubmitted the transaction for review by an interagency panel called the Committee on Foreign Investment in the US (CFIUS), said the person, who asked not to be named because the process is confidential. The extended review gives regulators more time to scrutinise the proposed transaction.

Extending the process gives Lenovo, based in Beijing, and IBM additional time to win approval from the US. Companies can pull their requests and re-file them during or at the end of the standard 75-day inquiry by CFIUS, which examines acquisitions of US companies by foreign investors to determine the effects on national security. The companies remain on track to complete the US$2.3 billion deal by the end of the year, according to Lenovo.

Restarting the national security review by CFIUS may indicate the companies are working towards an agreement with the committee to address security concerns raised by government agencies, said Timothy Keeler, a lawyer with Mayer Brown in Washington.

"On big, sophisticated deals involving potentially sensitive sectors, it's not uncommon," he said about re-filing with CFIUS. "Any China-related investment is going to be sensitive from a CFIUS standpoint. It doesn't matter what the sector is."

The Lenovo review comes amid heightened tension in the US over Chinese spying. The US on May 19 accused five Chinese military officials of stealing trade secrets and other information from American companies.