Lenovo Group Ltd (聯想) is to pick up about HK$1.7 billion (US$219 million) from selling out of a developer of property and parking lots in central China, striking the latest real-estate deal to shore up earnings battered by shrinking smartphone sales.
The world’s largest PC maker yesterday struck an agreement to sell a 49 percent stake in the joint venture to a unit of Sunac China Holdings Ltd (融創中國控股), the company that is investing US$2.2 billion in another struggling Chinese tech company called LeEco (樂視). As part of the deal, Lenovo also gets its hands on 264 million yuan (US$38 million) of the venture’s undistributed profits.
Lenovo’s pretax gain was calculated from a sale price of 1.6 billion yuan, net of transaction and other costs. Lenovo shares rose as much as 1.7 percent to HK$4.75 in Hong Kong.
Once one of China’s largest technology companies, Lenovo’s mobile-phone business is shrinking, while its PC division manages only anemic growth in the face of brutal competition.
Its profit plummeted more than two-thirds in the December quarter, missing analysts’ projections, after HP Inc threatened its position in North America. Smartphone sales declined by almost a quarter globally as Lenovo bled market share to rivals, such as Huawei Technologies Co (華為).
The Chinese PC maker has resorted to real-estate deals to buttress its working capital, including the sale of a research building in Beijing. It booked a US$206 million gain from property sales in the September quarter, on top of disposals of what it called non-core assets in the previous three months.
The deal to sell out of the venture, Chengdu Lian Chuang Rong Jin Investment Ltd (成都聯創融錦投資), is part of a clutch of property investments Sunac China unveiled the same day. It mainly develops homes, commercial property and parking spaces in two central Chinese provinces, according to Lenovo’s filing.
Tianjin-based Sunac, controlled by Sun Hongbin (孫宏斌), was among China’s most active real-estate buyers last year, striking the largest number of deals and becoming the third-largest acquirer by total deal value, according to data compiled by Bloomberg.
It has been looking for opportunities to invest in areas beyond real estate to sustain longer-term growth.
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