Lenovo begins acquisition of Medion

Lenovo has begun a staged acquisition of German PC manufacturer Medion by acquiring its publicly listed shares.

The acquisition, announced on Wednesday, will make Lenovo the third-largest PC company in Germany and give it a 7.5-percent share of the western European market, if it goes through.

"Bringing together this [Medion] 'front end' with Lenovo's 'back-end' manufacturing capability and supply chain will make both companies even more successful and competitive," Lenovo's chief executive Yang Yuanqing said in a statement on Wednesday. "Together, we can build a complete, end-to-end consumer platform that will both accelerate our PC business and give us the capabilities, expertise and relationships needed to win in the mobile internet space."

Both companies hope that the acquisition will deliver benefits stemming from a larger combined supply chain, a software development wing and the ability to negotiate better prices when procuring materials for their computers.

According to Lenovo, if the transaction goes through, then the companies will continue their existing business operations and, in the near term, maintain their own product brands. The acquisition is subject to regulatory approvals and is expected to close in the third quarter of 2011.

Bringing together this [Medion] 'front end' with Lenovo's 'back-end' manufacturing capability and supply chain will make both companies even more successful and competitive.

– Yang Yuanqing, Lenovo

Lenovo plans to offer €13 (£11.33) per share for all outstanding public shares in Medion, which represents a 29-percent premium over the average price of the shares over the past 30 days. This values Medion at around €630m, according to Reuters.

Medion's largest shareholder — board chairman Gerd Brachmann — has agreed to sell 36.66 percent of Medion's outstanding shares to Lenovo at the same price and will be paid 80 percent in cash and 20 percent in Lenovo shares for the purchase.

The public offer is only guaranteed as long as at least 15 percent of Medion's outstanding shares, aside from those held by Gerd Brachmann, are sold to Lenovo, giving the Hong Kong manufacturer a controlling 51-percent share in the company.

"With regard to the envisaged transaction, Medion AG has concluded a business combination agreement with Lenovo setting forth the cornerstones of the transaction, the support of the transaction by Medion AG and the mutual understanding regarding the future business co-operation between Medion and Lenovo," Medion said in a statement on Wednesday.