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Possible problems for IBM-Lenovo deal cheer investors

Possible problems for IBM-Lenovo deal cheer investors
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A report that US regulators could block the take-over of IBM’s PC business by Chinese computer maker Lenovo has been welcomed by investors, causing Lenovo’s shares to rise around 5% in Hong Kong. Bloomberg has reported the Committee on Foreign Investments in the US has security concerns about the takeover, which had never found favour with the markets. Apparently, the US worry is that the takeover could create opportunities for industrial espionage by the Chinese. The committee’s approval is needed to complete the deal.

Lenovo said in December that it had reached an agreement to buy IBM’s loss making PC business. That would create the world’s third largest PC maker, with 7.7% of the market. Reportedly IBM is currently in negotiations with the committee seeking ways to address its fears. The committee is made up of 11 US government agencies, including the departments of Justice and the Treasury and it reviews acquisitions of American businesses by companies based outside the country. Relatively few such deals have been blocked, but of those it has rejected, a number involved Chinese companies with links to the Beijing government, as Lenovo has.