Lenovo enters strategic collaboration with Alat, subsidiary of PIF

• Collaboration to accelerate Lenovo’s ongoing transformation, further enhance global presence, and increase geographic diversification of global manufacturing footprint
• Lenovo to catalyze Middle East and Africa (MEA) expansion with Alat partnership and capitalize on the region’s strong IT and Business Services industry growth momentum
• Investment to provide Lenovo with greater financial flexibility to power future growth

Lenovo Group Limited (HKSE: 992) (ADR: LNVGY) announced that it has signed a Strategic Collaboration Framework Agreement (“Strategic Collaboration”) and a Bond Subscription Agreement (“Investment”) with Alat, a Public Investment Fund* (PIF) company focused on transformative technology investment and sustainable manufacturing. The Strategic Collaboration and Investment will enable Lenovo to further accelerate its ongoing transformation, enhance its global presence, increase geographic diversification of its manufacturing footprint, and capitalize on the growth momentum of the IT and Business Services industry in the MEA region. The Strategic Collaboration serves as a strong endorsement of Lenovo’s existing strategy, strong execution, operational excellence, commitment to sustainability, and continuous investment in innovation.

The Strategic Collaboration, alongside a proposed US$2 billion Investment in zero coupon convertible bonds (“Bond Issue”), provides Lenovo with greater financial flexibility to implement its proven strategy, and will further drive its global transformation into a solutions and services-led business. The Strategic Collaboration includes a planned establishment of a regional MEA headquarters in Riyadh, Kingdom of Saudi Arabia (KSA), and a new PC and server manufacturing facility in the Kingdom to serve customers in the region. KSA is entering a new era of clean energy and has a goal to produce 50% of electricity from renewables by 2030. In support of that goal and Lenovo’s own 2050 net-zero target, Lenovo will be able to contribute to this vision and at the same time benefit from KSA’s clean power and sustainable manufacturing initiatives to help reach its own targets. It will also enable Lenovo to enhance its global supply chain resilience and flexibility by adding another location to its existing global footprint, and to serve customers in the MEA region more nimbly.

The MEA region continues to see strong growth momentum fueled by an increasing number of large-cap projects and its strong economies, with the region’s IT and Business Services market size expected to reach close to US$38 billion by 2027, according to IDC estimates.** Building on Lenovo’s industry leadership in the MEA region and globally, the partnership with Alat will help Lenovo tap into the robust growth in the region, unlock the transformative potential of digital technologies, and further enhance Lenovo’s position as a global technology powerhouse.

Yuanqing Yang, Chairman and CEO of Lenovo, said: “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. Looking ahead, Lenovo plans to build a tech & 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.”

Alat, a PIF company, was launched on February 1, 2024, and will create a global sustainable technology manufacturing hub in Saudi Arabia focused on advanced industrials and electronics. Initially its key strategic business areas will be semiconductors, smart devices, smart buildings, smart appliances, smart health, advanced industrials, next gen infrastructure technologies, electrification, and AI infrastructure. More information can be found here.

Details of the Strategic Collaboration and Investment

As part of the agreement, Lenovo will set up a regional MEA headquarters in Riyadh, which will include a customer center and a research and development center focusing on the MEA Region. Lenovo will also establish a new PC and server manufacturing facility in the KSA, extending the company’s existing global footprint which already includes 30+ manufacturing sites around the world spanning Argentina, Brazil, China, Germany, Hungary, India, Japan, Mexico, and the USA.

In addition, the parties have entered into a Bond Subscription Agreement in which Lenovo will issue US$2 billion in convertible bonds to Alat, the net proceeds of which will 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 an approximately 10% premium over the average VWAP (Volume Weighted Average Price) for the last 30 consecutive trading days 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, among others, Lenovo shareholders’ approval, and obtaining the relevant regulatory approvals.

Subject to the terms and conditions of the Strategic Collaboration Framework Agreement, Alat will have the right to nominate a non-executive director candidate to Lenovo’s Board subject to normal procedures for director appointments in Hong Kong.

Proposed Warrants Issuance

Additionally, Lenovo’s Board has approved a Proposed Warrants Issuance for 1,150,000,000 Warrants at an issue price of HK$1.43 per Warrant. The proposed three year Warrants issuance will enable Lenovo to raise additional funds to support future growth, while at the same time broadening its capital base, and is a further vote of confidence in the company’s ongoing transformation, global market leadership, and growth momentum. Once approved at Lenovo’s General Meeting, the Warrants will be issued via a private placement handled by Citigroup Global Markets Asia Limited.