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June 4, 2014

IBM and Lenovo seek US deal review extension

Acquistion of IBM's low-end server unit could be delayed if found to affect national security.

By Ben Sullivan

IBM and Lenovo are seeking an extension to a US national security review of Lenovo’s forthcoming purchase of IBM’s low-end server unit.

Bloomberg cited a source familiar with the matter, who said that both companies resubmitted the transaction for review by the Committee on Foreign Investment in the US (CFIUS).

The move comes as US and Chinese tensions rise amidst ongoing spying and hacking accusations.

The planned acquisition includes System x, BladeCenter and Flex System blade servers and switches, x86-based Flex integrated systems, NeXtScale and iDataPlex servers.

IBM will keep its System z mainframes, Power Systems, Storage Systems, Power-based flex servers, and PureApplication and PureData appliances.

Earlier this year, Lenovo CEO Yang Yuanqing said: "This acquisition demonstrates our willingness to invest in businesses that can help fuel profitable growth and extend our PC Plus strategy. With the right strategy, great execution, continued innovation and a clear commitment to the x86 industry, we are confident that we can grow this business successfully for the long-term, just as we have done with our worldwide PC business."

However, both IBM and Lenovo’s shares fell this week.

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IBM said in a statement: "Both IBM and Lenovo support the CFIUS process and have been through it successfully before, and we look forward to a positive outcome."

IBM was referring to a successfuly CFIUS approval in 2005 where Lenovo acquired IBM’s PC arm for $1.25bn.

By extending the review process, IBM and Lenovo would be given additional time to receive US approval. Companies are allowed to pull requests and refile them in the 75-day inquiry period by the committee.

The CFIUS reviews acquisitions of US companies by foreign firms to establish effects on US national security. Lenovo has said that the $2.3bn deal is still on track to be completed by the end of 2014

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