Experts predict Lenovo’s US buys will pass regulatory muster

WASHINGTON,  Jan 31 (Reuters):  US officials are likely to allow China's Lenovo Group to buy IBM's low-end server business and Google Inc's Motorola Mobility handset business if it agrees to concessions aimed at protecting US national security, experts said.
Computer maker Lenovo has advantages over other Chinese companies that should help it overcome the mutual suspicion between the United States and China over industrial spying and cybersecurity, such as its track record of successful US acquisitions in the past. And importantly, it is not directly controlled by China's government.
Even so, it could be in for a battle over its latest deals with at least one lawmaker expressing concern.
Lenovo said on Wednesday it would acquire Motorola Mobility, along with some 2,000 patents, for $2.91 billion. That news came days after an announcement the company would purchase IBM's low-end server unit for $2.3 billion.
The deals will be reviewed by the inter-agency Committee on Foreign Investment in the United States, or CFIUS, to ensure they do not threaten national security.
"We look forward to going through the regulatory process and we're going to work with the regulators with an open and transparent approach," Lenovo spokesman Brion Tingler said.
Lenovo has been through the secretive CFIUS process three times before and has won approval each time, according to a source familiar with the process.
The first was in 2005, when Lenovo bought IBM's ThinkPad business in a deal that catapulted the company into the global technology big leagues. In that case CFIUS approval came to the dismay of Representative Frank Wolf, a Republican from Virginia and a tough critic of China.
Wolf said he discovered after that approval that the State Department had made plans to purchase Lenovo computers. "They were not able to cancel the purchases but made sure that none of them were used for anything," he said.
"I just think we have to be careful," said Wolf. Lenovo also went through CFIUS reviews when it bought Stoneware Inc to expand cloud solutions and formed a strategic partnership with EMC Corporation. Both deals were announced in 2012.
It is not known what security concessions - if any - CFIUS wrung out of Lenovo in the previous transactions, but typical measures include having a security officer, a security plan or other steps aimed at preventing a foreign government from influencing a company in a way that would put US security at risk, the expert said.
CFIUS may also require that only US citizens handle certain products and services or demand that certain products be located only in the United States.