Lenovo to issue $2 billion bonds and set up base in Saudi Arabia amid kingdom’s tech push

The company, in partnership with PIF-owned Alat, will open a new PC and server manufacturing plant in the country

Lenovo, the world’s biggest maker of personal computers, will issue $2 billion in convertible bonds to Saudi Arabia’s sovereign wealth fund as part of a broad investment agreement that is expected to boost the kingdom’s technological ambitions.

The agreement was signed with Alat, the technology-focused arm of the Public Investment Fund, Lenovo said on Tuesday.

The deal includes the setting up of Lenovo’s Middle East and Africa head office in Riyadh, which will include a research and development centre, adding to a growing number of global companies that have set up strategic centres in the Arab world’s biggest economy.

The kingdom will also become home to a new PC and server manufacturing plant,adding to the more than 30 such factories Lenovo has globally.

The partnership will allow Lenovo to tap into “significant resources and financial flexibility to further accelerate our transformation and grow our business by capitalising on the incredible growth momentum in the MEA region”, its chairman and chief executive Yuanqing Yang said.

The proceeds of the convertible bonds will be used to repay debt and generate working capital, Lenovo said.

They are due in three years and will be convertible to equity at maturity at an initial conversion price of 10.42 Hong Kong dollars ($1.33) a share.

The bonds are zero coupon, meaning they will not accrue interest during the tenure to maturity. Such instruments are bought by investors at a deep discount and they offer full face-value profits when they mature.

The deal comes at a time when Saudi Arabia aims to increase foreign direct investment to $100 billion annually under its Vision 2030 agenda to diversify its economy away from oil.

The kingdom hopes to have 480 global companies establish their headquarters in the kingdom by 2030 amid efforts to improve economic output.

To attract businesses, Riyadh announced its regional headquarters programme in 2021, which came into effect on January 1.

The initiative offers several business-friendly benefits to companies, including a 30-year tax break, which includes a zero per cent rate for corporate tax and a withholding tax related to the “approved regional headquarters activities”.

It also provides companies with access to loan programmes, energy and utility enablement, employment support, export credit lines, land solutions and financial incentives for research and development, among others.

The initiative will also give companies access to government contracts as the kingdom moves ahead with several developments and initiatives to advance its economic and industrial strategies.

To date, the regional headquarters programme has licensed more than 200 companies, spanning sectors from technology to energy, and consultancy to food and beverage, according to the kingdom’s Ministry of Investment.

Alat was launched in February and seeks to make the kingdom a global centre for sustainable technology manufacturing.

The company has seven business units focused on domestic and international markets. These cover advanced industries, semiconductors, smart appliances, health, devices, buildings and next generation infrastructure.

It will manufacture products across more than 30 categories, including robotic systems, communication systems, advanced computers and digital entertainment, as well as advanced heavy machinery used in construction, building and mining.

Alat is chaired by Saudi Crown Prince Mohammed bin Salman and aims to create 39,000 direct jobs in the kingdom and achieve a direct non-oil gross domestic product contribution of $9.3 billion by 2030.

Lenovo said its expansion in Saudi Arabia is expected to “enhance its global supply chain resilience and flexibility”.

The company, which has several bases in Hong Kong, Beijing and North Carolina, controlled about a quarter of the global PC market at the end of 2023, data from Statista shows.

Source: thenationalnews

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