Committee on Foreign Investment in the U.S. Clears Lexmark Sale to Apex

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The Committee on Foreign Investment in the United States (CFIUS) last week approved the sale of Lexmark International for $3.6 billion to a consortium of investors that includes China-based Apex Technology, as well as PAG Asia Capital.

Following a required 30-day review and 45-day investigation of the transaction, the CFIUS found “no unresolved national security issues associated with the proposed acquisition,” according to a September 30 filing with the U.S. Securities and Exchange Commission.

The Lexmark sale was announced in April 2016.  The sale still requires approval from China’s State Administration of Foreign Exchange, but is expected to close in 2016, according to the U.S. Securities and Exchange Commission.

Wirth Consulting reported earlier in May of this year that an anonymous group of Lexmark employees, called Lexmark Employees for Ethical Conduct, cited various national-security issues involved with the acquisition in a letter sent to Wirth Consulting – see the story here.

Our Take

In our opinion, there are two ways to look at the acquisition of Lexmark by Apex Technology and PAG Asia Capital.

On the bright side, the deal may provide much-enhanced access to markets in Asia for Lexmark MFPs, printers, and software solutions.

On the other hand, various U.S. government agencies may no longer deploy Lexmark MFPs in their offices, citing security agencies. For instance, various U.S. government agencies no longer deployed IBM Thinkpad laptop PCs after IBM sold its Thinkpad division to China’s Lenovo Group. More recently, only last year, as reported by The Wall Street Journal, the U.S. Navy placed restrictions on federal-government procurement of Lenovo BladeCenter servers, after IBM sold its server division to Lenovo.

According to The Wall Street Journal article, the U.S. government appears to be becoming more reluctant to purchase foreign IT products because of concern with spying:

“Both the U.S. and China are wary of purchasing foreign technology for use in sensitive sectors because of spying concerns.

Gartner technology analyst Errol Rasit said the trend has accelerated. “There has been a shift recently for geopolitical reasons to bias sourcing decisions to local organizations,” he said. “Whether that be Chinese technology providers in China, or North American providers in North America, there is absolutely a shift there. It may affect the market opportunity for some of these vendors.'”

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