November 27, 2020

DealBook: Lenovo to Buy German Electronics Firm Medion

Lenovo, the Chinese computer maker that bought IBM’s PC division six years ago, said on Wednesday that it planned to take control of the German consumer electronics manufacturer Medion in a deal valuing the company at $909 million.

Lenovo said the acquisition would double its share of the German PC market, where it would become the third-largest player, after Acer and Hewlett-Packard. The deal, expected to close in the third quarter, would be the first time a Chinese company has bought a well-known German brand like Medion, which supplies computers and other devices to the popular discount chain Aldi.

Yang Yuanqing, head of Lenovo, said the company planned to combine “this ‘front end’ with Lenovo’s ‘back end’ manufacturing capability and supply chain” in a push further into Europe.

The move will give Lenovo 14 percent of the German PC market and about half that share for the PC market in Western Europe, the company said. It bears echoes of Lenovo’s landmark 2005 deal in America, when it bought the ThinkPad PC division of IBM for $1.75 billion.

Gerd Brachmann, chairman of Medion, has agreed to sell two-thirds of his 60 percent stake in the company. He will be paid in cash for 80 percent of the shares he is selling, and receive 20 percent in Lenovo shares, terms that are set to give him about 1 percent of Lenovo, the world’s fourth-largest PC maker after H.P., Dell and Acer.

Both the Lenovo and Medion boards have approved the deal, and Lenovo said the acquisition was contingent on an additional 15 percent of Medion shares being tendered by investors other than Mr. Brachmann. The transaction, subject to regulatory approval, will be financed with Lenovo’s cash reserves.

After the announcement, shares of Medion, which closed on Tuesday at 11.05 euros, jumped 2.04 euros, or 18.5 percent, to 13.09 euros in early trading on Wednesday in Frankfurt. At 13 euros a share, the Lenovo offer is 29 percent above the average closing price for Medion shares over the last 30 days.

The largest shareholder in Lenovo’s parent company, Legend Holdings, is the Chinese Academy of Sciences, a government research institute. An employee group and the conglomerate China Oceanwide also hold major stakes.

Founded in 1983 by Mr. Brachmann, Medion is based in Essen and employs about 990 people. It reported net income of 4 million euros for the first quarter, up from 3 million euros for the same period a year before, but sales declined to 371 million euros in the first quarter this year from 411 million euros in the period a year earlier.

Lenovo hired Barclays Capital as its financial adviser. The company said last week that it had generated record sales of $21.6 billion for the year ended March 31.

Article source: http://feeds.nytimes.com/click.phdo?i=d73534559ee80e1c09f298ce0ca1c7f4