Compal Electronics Inc (仁寶) is considering selling its stake in a joint venture with Lenovo Group Ltd (聯想) in a bid to improve its financial statements for this year, market analysts said yesterday.
The Taiwanese contract electronics maker will be able to sell its 49 percent stake in Lienpal Ltd (聯寶) to Lenovo from tomorrow for no more than US$750 million under the terms of a contract the two companies signed in September 2011.
“The months-long negotiations between Compal and Lenovo has reached the final stage. We expect Compal to announce the deal soon,” an analyst at Yuanta Securities Investment Consulting Co (元大投顧) said by telephone, citing sources from supply chains.
Compal is eager to wrap up the negotiations and complete the deal as soon as possible, as it wants to book disposal gains from the sale to “compensate” for its poor profitability in the first half of this year, said the analyst, who spoke on condition of anonymity.
Compal had to write off bad debt of NT$2.9 billion (US$95.6 million) owed by Leshi Internet Information and Technology Corp (LeEco, 樂視) for the April-to-June quarter, as LeEco repeatedly delayed its debt repayments.
Compal has booked NT$4.64 billion of bad debt over the past four quarters, according to the company’s filing with the Taiwan Stock Exchange.
The bad debts have eroded Compal’s profitability. The company’s net income in the first half of this year fell 60.36 percent annually to NT$1.32 billion.
Earnings per share were NT$0.31 in the first six months, compared with NT$0.77 from the same period last year.
Compal’s eagerness to complete the sale as quickly as possible has given Lenovo the upper hand, an industry watcher told the Taipei Times on condition of anonymity.
“Lenovo’s offer is far less than US$750 million. That is why the negotiations have taken so long,” he said by telephone, adding that the Chinese company’s offer was only about US$212 million at the beginning of the negotiations.
Compal and Lenovo in September 2011 formed Lienpal in Hefei, China, with paid-in capital of US$300 million.
The Taiwanese firm had expected to secure orders from Lenovo through the venture, in which it holds a 49 percent stake, while Lenovo holds the remaning 51 percent.
Compal spokesman Gary Lu (呂清雄) yesterday confirmed that the company is in talks with Lenovo and said that Compal would submit a filing with the Taiwan Stock Exchange regarding the sale.
“We will let investors know when the time is right,” Lu told the Taipei Times, without elaborating.
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