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IBM-Lenovo deal to face US govt. probe

$1.25bn sale depends on Bush's say-so

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The US Treasury Department has been formally asked to investigate the national security ramifications of the sale of IBM's PC division to Chinese vendor Lenovo, a move that could yet scupper the $1.25bn deal.

Last week, Republican Representatives Henry Hyde and Don Manzullo of Illinois, and Duncan Hunter of California made the request, which will see the Treasury-led Committee on Foreign Investments in the United States (CFIUS) formally investigate the sale.

That some on the Committee - in particular, the Department of Homeland Security and the Justice Department - had reservations about the deal emerged early last week. Sources said to be familiar with the Committee's initial peek at the deal were reported to have claimed that the naysayers are worried that ex-IBM PC facilities in the US could be used as bases for Chinese espionage activity.

CFIUS approval was required for the IBM-Lenovo to proceed smoothly. The two companies now face not only a formal investigation into the deal, but potentially the need for Presidential approval. The CFIUS may well have been intending to order an investigation in any case - either way, it has until close of play today to approve the deal or begin investigation proceedings. However, the request from Congress may have forced the Committee's hand.

It will now spend a month or so pondering the implications of the deal before providing President Bush with its recommendation. He will then declare the deal on or off. ®

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