(Yicai) Sept. 13 -- Lenovo Group’s stock price rose after the Chinese laptop giant said shareholders approved the issuance of USD2 billion of convertible bonds to a subsidiary of Public Investment Fund, Saudi Arabia’s sovereign wealth fund.

Lenovo [HKG: 0992] closed 1.5 percent higher at HKD9.23 (USD1.18) a share today, after gaining 1 percent yesterday. The benchmark Hang Seng Index gained 0.8 percent.

Lenovo's shareholders have approved the plan proposed in May to issue the zero-coupon convertible bonds and 1.15 billion warrants, priced at HKD1.43 each, to Alat, the Beijing-based company said yesterday. The three-year bonds have an initial conversion price of HKD10.42 (USD1.34) per share, potentially saving Lenovo USD100 million in annual interest.

The funds will be used to repay debt, finance operations, accelerate growth and transformation, and for general corporate purposes, Lenovo noted.

"The introduction of Alat as a long-term strategic partner is expected to further diversify Lenovo's global supply chain footprint, accelerate its expansion in the Middle East and Africa region, and drive greater financial flexibility," the company added.

As part of the collaboration deal signed in May, Lenovo will also set up a regional headquarters for the Middle East and Africa in Riyadh, the Saudi capital, which will include a customer services center and a research and development hub, and build a PC and server manufacturing base in the country to serve regional customers.

The MEA region continues to see strong growth fueled by an increasing number of large-cap projects and strong economies. Lenovo's revenue from the Middle East exceeded USD1.2 billion last year, accounting for about 2 percent of its total income.

“Our goal is that through this strategic cooperation, Middle East business will account for nearly 10 percent of Lenovo’s total revenue, which would be USD6 billion based on last year’s revenue,” said Chairman and Chief Executive Yang Yuanqing. “This is significant.”

The Middle East has incredible growth potential, especially thanks to its low-cost clean energy, Lenovo's Chief Financial Officer Wong Wai Ming said in May. The deal with Alat is in line with Lenovo's environmental, social, and governance goals and offers the company long-term supply chain advantages, he added.

Besides clean energy, information technology and high-end technologies are also key focuses of Saudi Arabia's economic transformation, Yang noted, adding that this aligns with Alat's interest in bringing Lenovo's production facilities to the region.

Saudi Arabia's demand for IT services and high-performance computing centers is increasing, mainly thanks to projects such as the Neom project, Yang pointed out.

The Neon project is a vast, USD500 billion urban development initiative launched by Saudi Arabia as part of its Vision 2030 plan to diversify its economy away from oil dependence and position the country as a global leader in key sectors such as renewable energy, biotechnology, digital industries, and sustainable living.

Editor: Futura Costaglione