Lenovo to buy IBM's low-end server unit for $2.3 billion

Thu Jan 23, 2014 3:51pm EST
 
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By Paul Carsten and Soham Chatterjee

(Reuters) - Chinese PC maker Lenovo Group Ltd has agreed to buy International Business Machine Corp's low-end server business for $2.3 billion in what would be China's biggest technology deal.

The long-expected acquisition comes nearly a decade after Lenovo bought IBM's money-losing ThinkPad business for $1.75 billion, eventually becoming the world leader in personal computers in 2012.

The sale of the low-end server operation - which still needs U.S. government approval - would allow IBM to focus on its decade-long shift to more profitable software and services.

The deal would increase Lenovo's share in the server market to 14 percent from 2 percent, said Peter Hortensius, a senior vice-president at Lenovo.

The deal needs clearance from the Committee on Foreign Investment in the United States (CFIUS), which protects U.S. national security.

Chinese companies faced the most scrutiny over their U.S. acquisitions in 2012, according to a CFIUS report issued in December.

Lenovo's purchase of IBM's notebook division faced scrutiny before approval, and this time will be easier, analysts said.

"It's fair to say that this deal is more likely to get through CFIUS without major problems than the 2005 transaction," said John Reynolds, a partner at law firm Davis Polk & Wardwell in Washington, D.C. who has handled CFIUS issues for 20 years.   Continued...

 
People stand under a sign showing the Lenovo company at a computer market in Shanghai January 21, 2014. REUTERS/Aly Song