IBM and Lehman Brothers
announced today they are teaming up to create the China Investment Fund with an
initial capitalization of US$180 million to drive the financial and business
transformation of Chinese enterprises through innovative business practices and
technology.
With each company initially providing $90 million, the Fund brings together
the strengths of both companies -- Lehman Brothers' global investment banking
and private equity experience and capabilities, and IBM's business and
operational insight as well as its technology leadership in China. Creation of
the Fund marks the first such alliance between IBM and Lehman Brothers anywhere
in the world.
The Fund's investments will support the China central government's policy
that encourages companies to be innovative in business practices and management
as well as in information technology and product development.
Unlike traditional venture capital firms that give early-stage companies
money in exchange for an ownership stake, IBM and Lehman will focus on mid-stage
to mature, public or private Chinese companies across many industry sectors. In
addition to funding, IBM and Lehman will provide management and technology
expertise to the companies in which they invest, enabling those companies to
keep pace with the quickly evolving Chinese market.
China's GDP was ranked fourth in the world in 2005, and with an economy
expected to grow 7.5 percent per year over the next five years, the country is
expected to rank third, behind only the U.S. and Japan, by 2010.
China's 11th 5-Year Blue Print (2006-2010), which encourages a company rather
than government-driven innovation system, focuses on optimizing and upgrading
traditional industries while developing high-tech industries such as information
technology, communications, next generation networks, nanotechnology,
biotechnology and an IT services sector.
"IBM has been working as an innovation partner to Chinese companies and the
Chinese government for a long time," said Henry Chow, chairman and chief
executive officer, IBM Greater China Group. "This Fund is an opportunity for us
to utilize our experience in China and, as a globally integrated company along
with Lehman Brothers' investment management expertise, help facilitate the
government's objectives of transforming China's enterprises."
Michael Odrich, Lehman Brothers global head of private equity, said: "Lehman
Brothers and IBM are highly committed to China and are excited about the
investment opportunities the Fund will have in this dynamic market. The Fund
will offer Chinese businesses access to investment capital as well as best
practice technology and business strategies from two of the world's most
innovative global organizations."
IBM first entered China in 1934 and returned to the country in 1979. IBM
China currently has 7,600 employees involved in sales, services, manufacturing
and research activities. The China Research lab located in Beijing is one of
IBM's eight Research labs worldwide. Established in 1995, it was the first
research facility to be located in China by a multinational corporation.
The alliance with Lehman Brothers strengthens IBM's emphasis on helping
Chinese companies improve their capabilities by introducing innovative
technology and management practices. In the last 18 months, IBM has established
partnerships with more than 250 VC-backed start-ups in China, giving them access
to IBM technology expertise, routes to market, and joint client engagements. The
alliance with Lehman Brothers will provide additional capability to work
directly with strategic partner companies.
Lehman Brothers was a pioneer among international investment banks in
entering the Chinese market and established its Beijing representative office in
1993. Since then, it has completed many "first-of-its-kind" transactions for
Chinese clients, and also is a Qualified Foreign Institutional Investor that
invests directly in Chinese domestic shares and bonds. China is an important
component of Lehman Brothers' Asia and global strategy. This alliance with IBM
is another step by Lehman Brothers toward delivering its full range of expertise
to the China market.
