Lenovo Group Ltd. (992), the world’s second-largest personal computer maker, will buy consumer electronics maker Digibras to expand its Brazil computer-market share and add mobile products including phones and tablets.
The deal has a base price of 300 million reais ($147 million), the company said in a Hong Kong stock exchange filing yesterday. The purchase will double Lenovo’s PC market share in Brazil, boosting market position to third from seventh, Chief Financial Officer Wong Wai Ming said. The purchase will add to earnings, he said, without providing a forecast.
“CCE gives us a very good opportunity to build a foundation in one of the world’s largest markets,” Wong said in a phone interview, referring to Digibras’ brand. “CCE gives us exposure to a high growth market in PCs and also exposure to TVs and smartphones, the entire PC-plus portfolio.”
Lenovo Chief Executive Officer Yang Yuanqing, advancing toward a goal of passing market leader Hewlett-Packard Co. (HPQ) in global computer shipments, is looking for ways to sustain the fastest annual pace in sales growth in six years. Yang’s expansion into mobile devices and rapidly growing markets such as Brazil and India will be bolstered by the purchase of Manaus, Brazil-based Digibras.
“This would be a good way to accelerate Lenovo’s operation in the Brazilian market,” Dennis Lam, a Hong Kong-based analyst at DBS Vickers, said in an e-mail yesterday. “It fits well with Lenovo’s strategy of attacking the emerging market aggressively.”
He estimates Lenovo had about 3 percent of Brazil’s PC market prior to the acquisition, which is well below its global average.
Yang, who is accelerating the development of smartphones, tablets and Internet-ready televisions, said in an Aug. 31 interview that Lenovo will consider acquisitions to drive growth.
Local production facilities are key to Lenovo’s expansion in Brazil because value-added taxes on imported PCs and smartphones can be as high as 43 percent, compared with 2.75 percent for local products, said Wanli Wang, a Taipei-based industry analyst at RBS Asia Ltd.
Lenovo will issue 46.9 million new shares to vendor Digibras Participacoes SA for Digibras Industria do Brasil SA and related companies Digiboard Eletronica da Amazonia Ltd. and Dual Mix Comercio de Eletronicos Ltd., paying the balance in cash, according to yesterday’s filing. The maximum consideration after adjustment is 700 million reais, it said.
Closely held Digibras’s products include the Onix and Iron line of laptop computers; the Mobi line of handsets; the Wintouch tablet that runs Microsoft Corp.’s Windows 7 software; and a range of desktop PCs and televisions, according to the company’s website.
Lenovo had about $3.8 billion of cash and equivalents as of June 30, according to data compiled by Bloomberg.
Lenovo increased global shipments of computers including Thinkpad laptops by almost 15 percent in the second quarter, compared with a 0.1 percent decline in industrywide sales, Stamford, Connecticut-based Gartner Inc. (IT) said in July. That increased Lenovo’s market share by two percentage points to 14.7 percent in the period, almost matching Hewlett-Packard’s 14.9 percent, Gartner said.
The Digibras purchase is in addition to Lenovo’s July 5 announcement of plans to invest $30 million to build a computer factory and a distribution center in Itu, in the Brazilian state of São Paulo. That unit will have as many as 700 employees in two years, when it’s expected to reach maximum capacity, Lenovo said at that time.
Lenovo’s fiscal first-quarter profit increased 30 percent on a worldwide expansion of market share, it said in an Aug. 16 statement. Sales in the company’s Asia-Pacific and Latin America division that includes Brazil increased 72 percent to $1.72 billion during the period, the company said at the time.
Lenovo’s sales rose 37 percent to $29.6 billion in the year ended March 31, the fastest rate since the 12 months through March 2006.
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