Lenovo to Expand Its Business in Western Europe by Acquisition of Medion

Lenovo Group, the world’s fastest growing major PC company, on Wednesday announced that it is acquiring Germany’s Medion AG, a leading supplier of various PC and consumer electronics products. The acquisition will double Lenovo’s market share in Germany and make it the third-largest PC company in Europe’s largest PC market.

“This agreement represents another bold move for Lenovo to realize its long-term strategy. It will complement both Lenovo's core PC business and new businesses which are key areas for development. With their strong consumer sales, marketing, services and retail capabilities, Medion’s business is perfectly aligned with our consumer growth strategy in Western Europe,” said Yang Yuanqing, chief executive officer of Lenovo.

Together, the combined company will have more than 14% share in the German PC market and approximately 7.5% share in the Western Europe PC market. This agreement also fuels Lenovo’s expansion in consumer PCs and the high-growth mobile Internet market. The combined companies are also looking to realize the benefits of collaboration, global scale, cost savings and increased synergies in the areas of procurement, global supply chain, software development, distribution channels and product and business model innovation.

“This announcement will strengthen Medion's competitive marketplace position while maintaining the stability, flexibility and existing company structure in Essen. I am proud to become a major private investor in the world’s fastest growing PC company. Along with my management team, I look forward to leveraging the synergies and ambitions that our companies share in growing our business together,” said Gerd Brachmann, founder and CEO of Medion.

Under the terms of the agreement, Lenovo will commence a public offer for all outstanding public shares of Medion for €13 per share in cash. The offer price represents a 29% premium over the average closing price for the previous 30 calendar days and a 27% premium over the average closing price for the previous 90 calendar days.

Under a separate agreement, Gerd Brachmann has agreed not to participate in the public offer, but to sell 40% of Medion’s outstanding shares to Lenovo at €13 per share. 80% of the purchase price to Gerd Brachmann shall be paid in cash and 20% in Lenovo shares. The public offer is conditioned upon a minimum participation level of at least 15% of Medion’s outstanding shares by shareholders other than Gerd Brachmann. Gerd Brachmann will stay as a major shareholder – holding 20% of the shares – at Medion.

After the transaction, both companies expect that all their existing operations, including customer service, product delivery and warranty fulfillment, will continue business as usual. In the near term, Medion and Lenovo will continue to maintain their own product brands and provide sales and support through existing channels.

“Bringing together this ‘front end’ with Lenovo’s ‘back end’ manufacturing capability and supply chain will make both companies even more successful and competitive. 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," added Mr. Yuanqing.

Last week, Lenovo announced its FY 2010-2011 earnings, surpassing $21 billion in revenue for the first time and delivering growth in every region, every segment and every product line. The company outgrew the worldwide market 28.2% to 7.4%. Additionally, it strengthened its profitability and market share position in Western Europe and in Germany.

Lenovo’s and Medion’s boards of directors have approved the transaction, which is subject to customary closing conditions including minimum level of participation in the public offer and regulatory approvals. The transaction will be financed from Lenovo’s existing cash resources. The public offer is expected to close in the third quarter of 2011.

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