Chinese computer company, Lenovo Group Ltd., agreed to buy German electronics retailer, Medion AG, worth 900 million dollars in its efforts to increase market share in Europe.
Lenovo's biggest acquisition since they bought IBM's PC business six years ago, only four months after Lenovo signed an agreement with NEC Corp. to sell its laptops in Japan.
The deal will double its market share to over 14 percent in the PC market in Germany, Europe's largest economy, and added about 7.5 percent market share in western Europe PC market, Lenovo said on Wednesday as reported by Reuters.
This news pushed shares of Medion rose 17 percent in Frankfurt, but Lenovo's shares fell more than 3 percent as some investors questioned the reasons for that acquisition.
"Lenovo may wish to strengthen its presence in mature markets," said Vincent Chen, an analyst at Yuanta Securities. "The question is why Germany, a market that grows very slowly and raises questions about how much profit will be got."
Medion is a supplier of low cost computers and electronic devices based in the city of Essen, western Germany. The company is also working with discount retail network of Germany, Aldi, two decades ago.
Medion was founded by Gerd Brachmann, a insnyur TV, which launched its business by importing the items non-food items, such as microwaves from Asia.
Both companies have agreed there will be no reduction in employment-related acquisition, and management Medion remain in his position.
Thinkpad laptop maker, Lenovo, will pay 231 million euros (340 million dollars) or 13 euros per share to the largest shareholder Medion, Branchmann, to 36.6 percent share.
Brachmann which has nearly 55 percent, after the transaction is still going to control 20 percent stake. CFO Eigen, who hold 75 thousand shares, also agreed to divest its shares, and Lenovo will make a conditional offer to all other shareholders.
"Through this process we will obtain 55 to 80 percent of the company (Medion)," said the Lenovo spokesman.
Globally, Lenovo has a 10 percent share in the PC market in first quarter 2011, up 8.4 percent from a year ago. This is the best performance among the five top players are tracked by research firm IDC.
Lenovo Chief Executive Yang Yuanqing said the company is open to any other takeover transactions in an effort to develop business.
Barclays Capital becomes sole financial adviser to deal with this Medion.
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