Dubai: The tech giant Lenovo Group has entered a broad collaboration agreement with Alat, the Saudi wealth fund owned high-tech and manufacturing initiative. It will lead to a planned establishment of a Lenovo MEA headquarters in Riyadh and a new PC and server manufacturing facility in the Kingdom.
Lenovo has signed a 'strategic collaboration framework agreement' as well as a planned $2 billion 'bond subscription agreement' with Alat, which will help Lenovo to 'further accelerate its ongoing transformation' and scale up its global presence. It will also help with a geographic diversification of its manufacturing footprint.
And, of course, capitalize on the growth prospects of the IT and business services industry in the Middle East and Africa markets.
"The collaboration serves as a strong endorsement of Lenovo’s existing strategy, strong execution, operational excellence, commitment to sustainability, and continuous investment in innovation," said a statement.
The proposed $2 billion investment will be by way of zero coupon convertible bonds, which provides Lenovo with 'greater financial flexibility to implement its proven strategy'.
Alat, a PIF company, was launched on February 1, 2024, to help create a 'global sustainable technology manufacturing hub in Saudi Arabia' and one that's focused on advanced industrials and electronics.
R&D capabilities too
The planned MEA headquarters in Riyadh will include an R&D center. The new PC and server manufacturing facility extends the company’s global footprint, which already includes more than 30 such sites around the world, including Argentina, Brazil, China, Germany, Hungary, India, Japan, Mexico, and the US.
“Through this powerful strategic collaboration, Lenovo will have significant resources and financial flexibility to further accelerate our transformation and grow our business by capitalizing on the incredible growth momentum in the MEA region," said Yuanqing Yang, Chairman and CEO of Lenovo.
"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.”
Bond issue
The bond deal will see Lenovo issue $2 billion in convertible bonds to Alat, the net proceeds of which are to 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 around 10 per cent premium over the average VWAP (volume weighted average price) for the last 30 consecutive trading days of the Lenovo stock, immediately prior to the date of the bond subscription agreement. (The closing of Lenovo’s issuance and Alat’s subscription of the convertible bonds is subject to Lenovo shareholders’ approval, and obtaining the relevant regulatory approvals.)
