(Yicai Global) Dec. 8 -- China's Lenovo Group Ltd. [HK: 0992] plans to acquire around 20 percent stake in Compal Electronics, Inc. [TW: 2324], a laptop manufacturer based in Taiwan, to usher in new type of cooperation between the two parties. It will be the first case of Chinese mainland investment into Taiwan's laptop original equipment manufacturer (OEM) industry if the deal goes ahead, the Taiwan Economic Daily News reported today.

Compal will transfer the stake of LCFC (Hefei) Electronics Technology Co. under its umbrella to Lenovo by the end of this year, the report suggested. However, Compal denied the report. "We have never heard of any such news," said Gary Lu, the company spokesman.

Over 60 percent of Lenovo's laptops are manufactured by LCFC, while the remaining less than 40 percent are made through outsourcing, of which about 50 percent to 60 percent are completed by Compal. Thus, Compal is the most important OEM of Lenovo as it boasts the largest proportion in the manufacturing process.

The partnership between Compal and Lenovo began in 2010 when both parties jointly invested to set up LCFC (Hefei) Electronics, with Lenovo holding 51 percent stake and Compal 49 percent. The main manufacturing base is set in Hefei, East China's Anhui province, with its core business is to produce Lenovo laptops. As the contract of LCFC expired in October, Compal has decided to dispose LCFC and the transaction is expected to be concluded in the first quarter of next year, the report claimed.

Compal invested USD150 million to take 49 percent stake of LCFC, and Lenovo and Compal decided to set the cap of the transaction amount at USD750 million. After deducting the original investment costs, the profit from the disposal of LCFC could reach USD600 million, it said.