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Lenovo Asks U.S. for More Time on IBM Server Deal

Stocks in this article: IBM GOOG

NEW YORK (The Deal) -- Lenovo Group and International Business Machines  (IBM - Get Report) appear to have asked U.S. national security regulators for more time to wrap up the review of Lenovo's planned $2.3 billion purchase of IBM's low-end server unit.

The move likely indicates that the companies need more time to finalize a national security mitigation agreement with the Committee for Foreign Investment in the U.S., or CFIUS, according to Farhad Jalinous, a Kaye Scholer partner who specializes in transactions with national security implications.

The acquisition is being reviewed by CFIUS, the Treasury Department-led panel that examines acquisitions of U.S. assets by foreign buyers for national security risks. The consensus among CFIUS lawyers when the deal was announced in January was that CFIUS would clear the transaction, possibly with mitigation agreements requiring Lenovo to firewall any segments that do business with defense or intelligence agencies.

The request for extra time was first reported by Bloomberg News.

"To me this signals that the parties are in the middle of negotiations with CFIUS over mitigation terms and need more time," Jalinous said.

Under federal law, CFIUS has a total of 75 days to review a transaction - first a 30-day initial examination and then a subsequent 45-day investigation if regulators believe it is warranted. At the end of the 45 days CFIUS must clear the transaction - with or without mitigation terms - or recommend that the President block the acquisition.

Jalinous said it is likely that the 45-day investigation will expire before the mitigation details can get worked out.

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