A private equity fund formed by Lehman Brothers and IBM has
agreed to buy a stake in a Chinese software company for HK$132
million, a move that could boost the fledgling local software
industry.
The investment also underscores the growing desire of Western
private equity groups to buy high-growth Chinese companies created
by the country's booming economy.
Under the deal, Lehman Brothers and IBM will buy a 7.7 percent
stake of Hong Kong-listed Kingdee International Software Group
Company Limited, headquartered in Shenzhen, a boom town in South
China's Guangdong Province.
IBM also announced it would form a global alliance with Kingdee,
which will help the firm grow into a global software player, the
two companies said yesterday.
Kingdee, one of China's largest software companies, develops
enterprise management software and e-business application solutions
in China and the Asia-Pacific.
The investment could give a Kingdee a leg-up in competition with
domestic rival Ufida software, formally known as Ufsoft, as well as
Germany-based SAP and US-based Oracle.
Kingdee reported a turnover of 611 million yuan in 2006, up 16
percent year-on-year. Profit surged by 35 percent to 97 million
yuan in the same period.
China's fledgling software market grew 17.8 percent year-on-year
in 2006 and the information technology (IT) service market
increased 26.3 percent, according to Beijing-based CCID
Consulting.
Kingdee competes in what might be the most profitable segment of
China's software market. The enterprise software it develops is
largely piracy-free.
IBM will work with Kingdee to redesign its software products to
tap into the international market.
The collaboration will enhance Kingdee's competitiveness, said
company Chairman Xu Shaochun.
The Kingdee purchase marks the first major investment for "The
China Investment Fund" formed by Lehman Brothers and IBM last year.
The US$180 million private equity fund was designed to take up
minority stakes in private and public companies in China.
Charles P. Wu, managing partner of The China Investment Fund and
vice-president of IBM Greater China Group, called the Kingdee deal
"a new business strategy for IBM in China".
"It should exert significant influence on future investments and
business cooperation for IBM in China. Furthermore, this
collaborative approach will become a key component of IBM's China
strategy," he said.
(China Daily June 5, 2007)