Lenovo Group Ltd (聯想), the world's third-biggest maker of personal computers, is in talks to buy control of Europe's Packard Bell BV, stepping up the Chinese company's efforts to expand outside of Asia.
Shares of Lenovo rose as much as 2.9 percent in Hong Kong after Packard Bell owner John Hui (許立信) said Lenovo has sole negotiating rights to acquire the Wijchen, Netherlands-based company, which he bought from Japan's NEC Corp last year. Lenovo spokeswoman Angela Lee (李淑賢) confirmed the exclusive talks.
The acquisition would help Lenovo overtake Fujitsu Siemens Computers Holding BV as the fourth-largest vendor in western Europe, according to estimates by research firm IDC. Lenovo, which bought IBM Corp's PC business two years ago, has failed to raise its market share within the top three outside of Asia, according to IDC.
"Lenovo has no consumer presence in Europe and Packard Bell is strong in countries like the UK, France and Italy," Charles Guo, an analyst at JPMorgan said. "These are important markets."
Packard Bell, which generated revenue of 1.5 billion euros (US$2.1 billion) last year, may fetch US$770 million, or 15 times estimated earnings, according to estimates by Xin Zhao, an analyst at Cazenove Asia Ltd in Hong Kong.
Lenovo's stock gained 2.2 percent to HK$5.02 (US$0.65) at the midday break yesterday in Hong Kong. Until yesterday, the shares had gained 55 percent this year, more than triple the gains of larger rivals Hewlett-Packard Co and Dell Inc.
The company, based in Beijing and whose headquarters are in Raleigh, North Carolina, said in a statement late yesterday to the Hong Kong stock exchange that it was preparing to buy Packard Bell.
An acquisition in Europe would fit with chief executive officer William Amelio's strategy to expand beyond China and increase sales directly to consumers worldwide. The consumer market grew three times faster than sales to corporate clients last year, according to IDC.
"The key idea of the purchase could more likely be to get access to a consumer supply chain in Europe that could be used by the acquirer to distribute their existing products," said Venugopal Garre, an analyst at Credit Suisse Group who has a "neutral" rating on the stock.
Last week, Lenovo reported profit in the quarter ended June 30 jumped almost 13-fold to US$66.8 million after the firm eliminated jobs and gained orders. The results prompted at least five analysts to raise their target prices on the stock, helping the shares surge as much as 6.3 percent the following day.
Packard Bell, founded in 1991, increased its number of customers to five million in 2005, almost four times the number in 2003, according to the Dutch company's Web site. Sales grew by more than 10 percent for three consecutive years, it said.
Packard Bell would boost Lenovo's shipments in western Europe by 86 percent, closing in on the region's third-largest vendor, Acer Inc, according to estimates by IDC. Acer sold 3.3 million computers in the first half, triple those of Lenovo, the Framingham, Massachusetts-based research firm said.
Lenovo's Lee declined to say whether other companies had sought to buy Packard Bell.
Acer chairman Wang Jeng-tang (王振堂) said in April that the Taipei-based company planned to buy a "small" computer maker this year, declining to name any acquisition targets. The Chinese-language Apple Daily reported last month, citing unidentified European distributors, that Acer was in talks to buy Packard Bell and would make an announcement before September.