Compal Electronics Inc (仁寶) yesterday said that its board of directors has approved plans to sell a 49 percent stake in a joint venture with Lenovo Group Ltd (聯想) to the Chinese PC giant.
Compal said it is to sell its stake in Lienpal Hefei Ltd (聯寶) to a Chinese investment company specified by Lenovo for US$257 million.
The all-cash deal is expected to be completed by the end of this month via Billion Sea Holding Ltd, Compal’s fully owned subsidiary, the firm said.
Compal is slated to book NT$2.58 billion (US$84.26 million) in sales proceeds this quarter, which would boost its earnings per share by NT$0.59.
Lienpal was formed in April 2012 with a US$147 million commitment from the Taiwanese contract notebook maker in a move industry analysts said was a way to bolster ties with the Chinese PC brand.
Since then Compal has booked US$500 million to US$600 million in profit contribution from its stake in Lienpal, Compal spokesman Gary Lu (呂清雄) told a news conference at the Taiwan Stock Exchange in Taipei.
However, the final price for the stake fell significantly short of the maximum US$750 million under the terms of a September 2011 deal between Compal and Lenovo.
“It was a different time with different terms back then,” Lu said.
After the loss of the laptop production base in China’s Hefei Province, Lu said that Compal’s biggest presence in the country is in Kunshan and that it has established operations in Chongqing, Nanjing and Chengdu.
“We will continue to work with Lenovo,” Lu said, adding that the sale would benefit both firms.
Market analysts have said that under the terms of the 2011 contract, Compal became eligible to sell its stake in Lienpal last year, but the deal was delayed by lengthy price negotiations.
A group of Compal employees assigned to work at Lienpal would remain with Lenovo, Lu said.
He declined to comment on the background of the buyer, saying that would be better explained by Lenovo.
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