Sunday 16 June 2024

PIF unit to invest $2bn in Lenovo; PC hub in KSA planned

RIYADH, 18 days ago

Lenovo Group has signed a strategic collaboration framework agreement and a bond subscription agreement with Alat, a Public Investment Fund (PIF) company focused on transformative technology investment and sustainable manufacturing. 
The collaboration includes a planned establishment of a regional MEA headquarters in Riyadh, and a new PC and server manufacturing facility in the kingdom to serve customers in the region. 
Meanwhile, under the bond subscription agreement, Lenovo will issue $2 billion in convertible bonds to Alat. 
The strategic collaboration and investment will enable Lenovo to further accelerate its ongoing transformation, enhance its global presence, increase geographic diversification of its manufacturing footprint, and capitalise on the growth momentum of the IT and Business Services industry in the MEA region, a statement said. 
The collaboration serves as a strong endorsement of Lenovo’s existing strategy, strong execution, operational excellence, commitment to sustainability, and continuous investment in innovation. 
The strategic collaboration, alongside a proposed $2 billion investment in zero coupon convertible bonds (bond issue), provides Lenovo with greater financial flexibility to implement its proven strategy, and will further drive its global transformation into a solutions and services-led business. 
Saudi Arabia is entering a new era of clean energy and has a goal to produce 50% of electricity from renewables by 2030. In support of that goal and Lenovo’s own 2050 net-zero target, Lenovo will be able to contribute to this vision and at the same time benefit from KSA’s clean power and sustainable manufacturing initiatives to help reach its own targets, it said. 
It will also enable Lenovo to enhance its global supply chain resilience and flexibility by adding another location to its existing global footprint, and to serve customers in the MEA region more nimbly. 
The MEA region continues to see strong growth momentum fuelled by an increasing number of large-cap projects and its strong economies, with the region’s IT and Business Services market size expected to reach close to $38 billion by 2027, according to IDC estimates.
Building on Lenovo’s industry leadership in the MEA region and globally, the partnership with Alat will help Lenovo tap into the robust growth in the region, unlock the transformative potential of digital technologies, and further enhance Lenovo’s position as a global technology powerhouse, it said.
Yuanqing Yang, Chairman and CEO of Lenovo, said: “Through this powerful strategic collaboration, Lenovo will have significant resources and financial flexibility to further accelerate our transformation and grow our business by capitalising on the incredible growth momentum in the MEA region. Looking ahead, Lenovo plans to build a tech and manufacturing hub in Saudi Arabia and will help define the future of the region as a center of innovation which Alat will benefit from. This is a huge vote of confidence in our company, our market leadership, and our future growth potential.” 
Alat, a PIF company, was launched on February 1, 2024, and will create a global sustainable technology manufacturing hub in Saudi Arabia focused on advanced industrials and electronics. Initially its key strategic business areas will be semiconductors, smart devices, smart buildings, smart appliances, smart health, advanced industrials, next gen infrastructure technologies, electrification, and AI infrastructure.  More information can be found here, the statement added.
Details of the Strategic Collaboration and Investment
* As part of the agreement, Lenovo will set up a regional MEA headquarters in Riyadh, which will include a customer centre and a research and development centre focusing on the MEA Region. 
* Lenovo will also establish a new PC and server manufacturing facility in the KSA, extending the company’s existing global footprint which already includes 30+ manufacturing sites around the world spanning Argentina, Brazil, China, Germany, Hungary, India, Japan, Mexico, and the US.
* The parties have entered into a bond subscription agreement in which Lenovo will issue $2 billion in convertible bonds to Alat, the net proceeds of which will be used for repaying existing debts of Lenovo and general corporate and working capital purposes. The convertible bonds are due in three years after issuance and will be convertible to equity at maturity at an initial conversion price of HK$10.42 per share. This represents an approximately 10% premium over the average VWAP (Volume Weighted Average Price) for the last 30 consecutive trading days immediately prior to the date of the agreement. 
* Alat will have the right to nominate a non-executive director candidate to Lenovo’s Board subject to normal procedures for director appointments in Hong Kong.
* Additionally, Lenovo’s Board has approved a proposed warrants issuance for 1,150,000,000 warrants at an issue price of HK$1.43 per warrant. The proposed three-year warrants issuance will enable Lenovo to raise additional funds to support future growth, while at the same time broadening its capital base, and is a further vote of confidence in the company’s ongoing transformation, global market leadership, and growth momentum. Once approved at Lenovo’s General Meeting, the warrants will be issued via a private placement handled by Citigroup Global Markets Asia Limited. 


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