Cfius set to scrutinize Lenovo's purchase of Motorola's handset business

February 3
11:20 AM 2014

The $2.9 billion purchase by Chinese firm Lenovo of the handset business of Motorola last week will be thoroughly reviewed by the Committee on Foreign Investment in the United States or Cfius, the Financial Times reported. The Cfius is the committee of the US government that evaluates deals to check for national security concerns.

As part of the deal with parent company Google, Lenovo will get 2,000 patents and obtain a license to other Google smartphone intellectual property which Cfius will review very carefully, the report said.

However, people knowledgeable about the matter told FT that Google still keeps majority of the more important and sensitive patents. Another company also owns Motorola's business that has contracts with government. They added that the deal covers hardware and not software and the handsets that are manufactured in China are also already available in the US, the report said.

As a consequence, the sources told FT that the acquisition of Lenovo may not have to contend with major obstacles even if it may still need to comply with particular conditions asked of it by Cfius in order for the deal to push through. The small presence of Motorola in the US could also work to Lenovo's favor as the handset business only holds a market share of less than 5%, the report said.

However, what is not yet known is if the transaction will encounter substantial political opposition. None has been made so far but the process is still in its early stages. Lenovo has been successful in its previous encounters with Cfius but it could be a larger political target because of its rising ambitions in the US at a time when anxiety over information leaks remains strong, the report said.

The deal with Motorola came after Lenovo also said it was acquiring the low-end server business of IBM for $2.3 billion, the report said. 

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