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Last updated: August 8, 2007 10:52 am

Lenovo limbers up to target Packard Bell

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Lenovo, the Chinese personal computer manufacturer that acquired IBM’s PC unit two years ago, is in exclusive talks to buy European PC company Packard Bell.

Lenovo has been in discussion with Packard Bell owner John Hui, a Hong Kong-born entrepreneur, for “a few weeks”, Hugues Gontier, a spokesman for Packard Bell told the Financial Times Tuesday night.

“Lenovo is in exclusive talks to acquire Packard Bell,” he said.

However, Mr Gontier was careful to stress that talks were still in the preliminary stages and might not lead to a deal.

Lenovo said in a statement on Tuesday that it was “in discussion with an independent third party in relation to a proposed acquisition” of Packard Bell, adding that a deal “may not materialise”.

It declined to comment further.

Mr Hui bought Packard Bell from NEC last year for an undisclosed sum, believed to be just under $90m.

Acer, the Taiwanese rival that is threatening Lenovo’s status as the world’s third largest PC producer, was also thought to be interested in Packard. Acer also de­clined to comment.

Mr Gontier declined to comment if it has held talks with Acer.

”I have heard the rumors about Acer, but I cannot tell you if they are true or not,” he said.

Acer’s PC sales surpassed those of Lenovo in the first quarter of this year, although in the second quarter the Chinese company recovered third place in the global market behind Hewlett-Packard and Dell.

Buying Packard Bell could help Lenovo build its business in Europe, where it has so far made little impression on consumers.

Such an acquisition could also further add to the management challenge facing the Chinese company, which has been struggling to integrate its scattered brands and operations since its purchase of IBM’s former PC unit for $1.75bn in 2005.

However, Lenovo is increasingly confident that the IBM PC unit purchase is beginning to show results.

“We have successfully completed our integration of the IBM operations,” Yang Yuanqing, Lenovo chairman, said yesterday.

Unlike Lenovo, Acer is already strong in Europe, and analysts said an acquisition there should not be a priority for the Taiwanese company with expansion in other markets, including China, a greater priority.

Wang Jen-tang, Acer’s chairman, has said it is in talks with potential acquisition targets and expects to close a deal on a “small” acquisition by September.

Mr Wang said the targets were neither US nor Taiwanese companies.

“Suitable targets in Europe would be either Packard Bell or Fujitsu
Siemens,” said a banker who works on mergers and acquisitions in the sector. He added that Acer might be seeking a stake in Gateway, the US computer company, through a deal with Packard’s owner, Mr Hui, who is also Gateway’s second-
largest shareholder.

Packard: fifth-largest PC maker in western Europe

Packard Bell, legally headquartered in the Netherlands, is the fifth-largest consumer PC manufacturer in western Europe, with sales of around €1.5bn ($2.06bn) last year, writes Pan Kwan Yuk in Paris.

According to Gartner, the market research group, Packard had about 3 per cent of the consumer PC market in western Europe, having sold about 2.5m units in 2006.

“Packard’s strong retail presence in the UK and France would be of interest to Lenovo, which is trying to move into the consumer PC market in Europe,” said Ranjit Atwal, a senior analyst at Gartner. “Packard is seen as a stepping stone into the European market.”

Although talks are still in preliminary stages, Lenovo’s acquisition, if successful, would mark the sixth incarnation for Packard, which came to life in the 1930s as a US radio manufacturer.

In the 1970s, it operated as a part of the defence manufacturer Teledyne, and in 1986 a group of investors brought the name to low-cost PC manufacturing.

Since 1995, it has been producing computers for consumers as NEC Packard Bell.

Last year, the company was sold to John Lap Shun Hui, a Hong Kong-born entrepreneur, for an undisclosed sum.

Mr Hui has a strong track record in the computer industry, having sold eMachines, a budget computer maker he founded, to Gateway for $290m in 2004.

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