HP and Tsinghua Holdings jointly announced a partnership that will bring together Chinese enterprise technology assets of Hewlett-Packard and China's Tsinghua University experience.
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Under the definitive agreement, Tsinghua Holdings subsidiary, Unisplendour Corporation, will purchase a 51% stake in a new business called H3C, comprising H3C Technologies and HP's China-based server, storage and technology services businesses, for approximately $2.3 billion, valuing the total business at $4.5 billion (net of cash and debt).
Combining these two entities, the new H3C will be a technology powerhouse in China with a market-leading portfolio that will be #1 in networking and a leader in servers, storage and technology services.
HP sees continued long-term growth opportunities in China, and HP China will maintain 100% ownership of its existing China-based Enterprise Services, Software, HP Helion Cloud, Aruba Networks, Printing and Personal Systems businesses.
With approximately 8,000 employees and approximately $3.1 billion in annual revenue, the new H3C will be the leading provider of converged infrastructure solutions and technology services in the China market.
The company will offer customers a complete portfolio of enterprise IT solutions, including networking, servers, storage and services, and will maintain H3C's current localized, high-touch, customer-first service model. The new H3C will build off of its legacy of innovation, with over 5,700 patents and 2,500 engineers focused on developing differentiated technology solutions for the future of compute infrastructure.
Once the transaction closes, the new H3C will be the exclusive provider for HP's server, storage and networking portfolio, as well as HP's exclusive hardware support services provider in China, customized for that market.
The new H3C will become a subsidiary of Unisplendour, a publicly traded operating subsidiary of Tsinghua Holdings Co., Ltd., the asset management arm of prestigious Tsinghua University in China. Unisplendour is currently among the top software vendors and system integrators in China, and has been in a long-term strategic distribution partnership with HP since 1999.
Until the close, Henry Tso will continue to lead H3C Technologies' networking business and Ye Jian will continue to lead HP China's Server, Storage and Technology Services businesses. Separately, Robert Mao will remain the chairman of HP China, which will include HP's Enterprise Services, Software and Cloud businesses in China. All three leaders will be actively involved in determining the most effective management team for the new organization.
The new H3C generated CY2014 adjusted revenues of $3.1 billion, adjusted operating profit of $0.4 billion and adjusted GAAP net income of $0.3 billion. HP will equity account for its investment going forward.
The transaction is expected to close near the end of 2015, subject to Unisplendour shareholder vote, regulatory approvals and other closing conditions. ■