IBM sells 3.5% stake in Lenovo

The placement is comfortably covered after a surge in the PC company's share price.
Following an almost 10% run-up in LenovoÆs share price over the past few days, sole bookrunner Citigroup executed a private placement on behalf of IBM on Monday afternoon and evening. The 300 million shares sold in the transaction amount to a 3.5% stake.

IBM raised HK$960 million ($123 million) through the deal.

Following the sale, IBM û which sold its personal computer division to Lenovo in April 2005 in return for cash and a 15% stake in Lenovo û faces a 90-day lockup.

The placement priced at the bottom of the range; however bankers say that investors took into account the stockÆs strong performance since last Thursday.

The stock closed at HK$3.44 on Monday, while price guidance on the placement came in at HK$3.20-HK$3.30, equivalent to a 4%-7% discount to the closing price. The sale was finalised at a discount of 7%.

The book was open from 5pm till 10pm, mainly to allow US West Coast investors to take a look at the stock, says one specialist. ôAs we expected, demand was mainly driven by Asian investors who can do their own analysis and are comfortable with the company,ö he says.

The investors who bought into the deal are reportedly looking at better PC demand in the second half of 2007; and they are looking at further progress in the companyÆs cost cutting.

It was not clear what subscription levels were, although one specialist says the book was æcomfortablyÆ covered.

In geographical terms, 10% of the demand came from Europe, 20% from the US, and the rest from Asia. The investor base was a mix of hedge funds and long-only funds, as well as a number of existing shareholders. No allocation breached the 5% level.

PC maker Lenovo has had mixed news recently, with Citigroup increasing its price target to HK$4.20 by end-2007, while Credit Suisse downgraded the stock last Friday after its earnings announcement.
¬ Haymarket Media Limited. All rights reserved.
Share our publication on social media
Share our publication on social media