(Bloomberg) -- Lenovo Group Ltd. will pick up about HK$1.7 billion ($219 million) from selling out of a developer of property and parking lots in central China, striking the latest real estate deal to shore up earnings battered by shrinking smartphone sales.
The world's largest PC maker struck an agreement to sell a 49 percent stake in the joint venture to a unit of Sunac China Holdings Ltd., the company that's investing $2.2 billion in another struggling Chinese tech company called LeEco. As part of the deal, Lenovo also gets its hands on 264 million yuan ($38 million) of the venture's undistributed profits.
Lenovo's pretax gain was calculated from a sale price of 1.6 billion yuan, net of transaction and other costs. Shares in the company rose as much as 1.7 percent to HK$4.75 in Hong Kong.
Once one of China's largest technology companies, Lenovo's mobile-phone business is shrinking while personal-computer division manages only anemic growth in the face of brutal competition. Its profit plummeted more than two thirds in the December quarter, missing analysts' projections, after HP Inc. threatened its position in North America. Smartphone sales declined by almost a quarter globally as Lenovo bled market share to rivals such as Huawei Technologies Co.
The Chinese PC maker has resorted to real estate deals to buttress its working capital, including the sale of a research building in Beijing. It booked a $206 million gain from property sales in the September quarter, on top of disposals of what it called non-core assets in the previous three months.
The deal announced Thursday to sell out of the venture, Chengdu Lian Chuang Rong Jin Investment Ltd., is part of a clutch of property investments Sunac China unveiled the same day. It mainly develops homes, commercial property and parking spaces in two central Chinese provinces, according to Lenovo's filing.
Tianjin-based Sunac, controlled by Sun Hongbin, was among China's most active real estate buyers last year, striking the largest number of deals and becoming the third-largest acquirer by total deal value, according to data compiled by Bloomberg. It's been looking for opportunities to invest in areas beyond real estate, to sustain longer-term growth.
To contact Bloomberg News staff for this story: Gao Yuan in Beijing at ygao199@bloomberg.net.
To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, Edwin Chan
With assistance from Gao Yuan
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