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September 8, 2009 1:43 pm

Legend Holdings plans public listing

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China’s Legend Holdings on Tuesday unveiled plans to transform itself from a state-controlled enterprise into a listed company in a move that could help its affiliate Lenovo gain access to orders and overseas acquisition targets.

Legend – which is the largest shareholder in personal computer maker Lenovo with a 42.3 per cent stake – said on Tuesday it planned to take all its affiliates public and list the holding company.

Liu Chuanzhi, co-founder and chairman of Legend, said Lenovo had had difficulties in the past with orders related to governments because “it was seen as a state-controlled company”. However, he said the restructuring at Legend meant Lenovo had become in effect a privately owned institution.

Although Lenovo became a partly US-based company after acquiring the PC business of IBM in 2005, it has faced challenges when competing for business regarded as relevant to national security by the US.

Other Chinese companies such as Huawei, the fast-growing maker of telecoms equipment, have struggled in the US market over suspicions about the state’s place in their ownership structure.

Lenovo, Lenovo Capital and Digital China, another subsidiary, are already listed in Hong Kong. Raycom Capital, a real estate developer owned by the group, plans an A-share listing on China’s domestic market.

Mr Liu said that because Chinese law excludes listings of holding companies whose affiliates are listed on the domestic market, Legend Holdings would be forced to list abroad unless Beijing changed the law.

The reorganisation of Legend comes after the Chinese Academy of Sciences, a government research institution, sold a 29 per cent stake to China Oceanwide, a privately owned conglomerate, for $404m. Although the CAS remains Legend’s single largest shareholder, ahead of a Lenovo employee group and Oceanwide, that deal lowered its stake below 50 per cent.

Mr Liu said CAS would reduce its stake again. “There will be further changes to Legend’s shareholding structure.”

Legend – which has a string of investments through Legend Capital, its venture capital arm, and Hony Capital, its private equity fund – said it planned to make direct investments of Rmb10bn ($1.5bn) in the next five years.

It aimed to invest in a broad range of sectors including clean energy, real estate and financial services. It planned to cover the full range of investments from in-house incubation and early-stage support to late-stage investments.

Mr Liu said Legend would focus on helping Chinese state-owned enterprises privatise, play a role in industry consolidation and assist enterprises expand overseas.

Legend had consolidated sales of Rmb115.2bn in 2008 and has 30,000 employees worldwide.

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