IBM and Lehman Brothers jointly invest in Kingdee

The First Investment by the Alliance - a 7.7% Stake in Kingdee.

IBM (NYSE: IBM) and Lehman Brothers (NYSE: LEH) announced that they are investing in Kingdee International Software Group Company Limited (Kingdee). Following completion of the investment, IBM and Lehman Brothers will each become a shareholder of approximately 3.85% of the issued share capital of Kingdee. Meanwhile, IBM and Kingdee International will form a global alliance to enhance the competitiveness of their clients in China and global markets, and help Kingdee International to become an international company and truly global software provider.

In October 2006, IBM and Lehman Brothers entered into an offshore business alliance with the aim to jointly invest in Chinese enterprises. This business alliance has been described and branded as “The China Investment Fund”. As the first major investment by this alliance, the Kingdee transaction represents a cooperative initiative by IBM and Lehman Brothers to help domestic Chinese enterprises develop their management capabilities and grow into world-class corporations.

Since the formation of this business alliance last year, the “China Investment Fund” business alliance has focused on public and private, mid-stage and mature Chinese companies across various industry sectors. IBM and Lehman Brothers aim to help these Chinese companies expand their business and management capabilities by leveraging IBM’s business and operational insights and technology leadership in China, and Lehman Brothers’ global investment banking and private equity expertise and capability. As a leading ERP and E-Commerce solutions provider in the China market, Kingdee has developed into one of the fastest growing ISVs in the global software market. IBM and Lehman Brothers believe that this investment will also be a catalyst for the development of China’s local software industry.

Charles P. Wu, managing partner of China Investment Fund and IBM Greater China Group vice president said he was very pleased with the success of this collaboration. Since its inception, the “China Investment Fund” business alliance has generated a great deal of interest from Chinese enterprises due to its innovative investment approach. The initiative also reinforces IBM’s commitment to supporting the development of the Chinese market. The “China Investment Fund” business alliance should exert significant influence on future investments and business cooperation for IBM in China. Furthermore, this collaborative approach will become a key component of IBM’s China strategy. Wu also said, “IBM remains dedicated to being a reliable innovation partner with the Chinese government and Chinese enterprises. Today, a number of dynamic, mid-stage Chinese enterprises have the potential to become global corporations. As a globally integrated enterprise, we aim to assist them in expanding their business, exploring potential markets and achieving innovations, and to demonstrate IBM’s value as an enabler for their success.”

Lehman Brothers has been a pioneer among global investment banks since establishing its presence in China and has launched many first-of-its-kind transactions in the market. Commenting on the first investment made by its business alliance with IBM, Chris Manning, managing director and head of Asia Private Equity, Lehman Brothers said, “China is an important market to Lehman Brothers and is an integral part of our global strategy to expand our franchise in Asia. This partnership with IBM aligns with the Firm’s commitment to offering innovative solutions to service our clients. Kingdee is a leader in China’s enterprise resources planning (ERP) industry, particularly among the small-and-medium-enterprises segment, which offers fast-growing and untapped growth opportunities. We are very excited about this investment opportunity as we are about our investment partnership with IBM in China.”

Xu Shaochun, chairman of Kingdee, said, “Until now, Kingdee and IBM have already enjoyed almost ten years of collaboration. During this time, Kingdee has benefited greatly from IBM’s leading technology expertise and comprehensive business experience. As we seek enough capital to grow, this collaboration with the ‘China Investment Fund’ business alliance has further strengthened our relationship with IBM and added a new relationship with Lehman Brothers. We believe that this collaboration will bring more opportunities for us, adding value to our business and helping us to be more competitive in the global market.”

Kingdee International and IBM also signed a MOU on global collaboration, mainly on various aspects like globalization and SOA, marketing/sales/channels/customers, consultation and application management services (AMS), and Software as a Service (SaaS).