Hony sells mobile unit stake for 2x

Hony Capital is selling back its 40% stake in Lenovo Mobile to the Lenovo Group, having originally invested $45m.

China-focused private equity firm Hony Capital is selling its investment in Lenovo Mobile Communication Technology back to the company's original parent, computer giant Lenovo Group, less than two years after the investment was made.

The sale of its shares will roughly double Hony Capital's original $45 million investment.

Lenovo Group had sold the handset unit to Hony Capital and three other investors for $100 million in March 2008 to return its focus to the personal computer business, the company said in a filing with the Hong Kong Stock Exchange.

Lenovo: Back with its parent

It sold a 45 percent stake to Jade Ahead, which is wholly-owned by Hony Capital; 30 percent to LEV Ventures, a limited liability company incorporated in China; 15 percent to Ample Growth, a limited liability company incorporated in the British Virgin Islands; and 10 percent to Super Pioneer, a venture capital fund, the company said.

JadeAhead had originally invested $45 million in Lenovo Mobile. It subsequently sold a 5 percent stake to Gainnew for $4 million.

Jade Ahead is now selling its 40 percent stake in the handset unit to Lenovo Group for $80 million. Of this sum, Hony Capital will receive $50 million in cash corresponding to the interest it has in Lenovo Mobile through Jade Ahead.

The remaining $30 million will be paid through the issue of shares to Legend Holdings, the parent company of Lenovo Group. The Chinese government-controlled company has an indirect interest of more than 30 percent of the share capital of Jade Ahead, through its stake in the fund management company of Hony Capital, making Jade Ahead an associate of Legend Holdings.

Legend Holdings owns a stake of 41.44 percent in Lenovo Group, which has been a lucrative private equity investment.

In September, TPG, Newbridge Capital and General Atlantic sold 291.5 million Lenovo shares, raising about $133 million. That followed on from a November 2007 private placement of shares, which raised roughly $374 million – more than the three firms’ initial $350 million investment made in 2005. That deal, which provided the means for Lenovo’s acquisition of IBM’s personal computer business, saw TPG invest $200 million, General Atlantic invest $100 million and Newbridge invest $50 million.

Hony Capital declined to comment.