HPE Sells Its Stake In H3C China Joint Venture For $3.5B
Financial advisory firm UBS has said that while it expects some debt repayment and share buybacks it believes HPE “could use a large percentage of the proceeds to pursue a strategic transaction.”
Hewlett Packard Enterprise has entered into an agreement to sell its 49 percent stake in its H3C Chinese enterprise IT joint venture for $3.5 billion.
H3C is the exclusive provider of HPE servers, storage and associated technical services in China.
HPE holds a 49 percent share in H3C with Chinese IT provider Unisplendour holding the remaining 51 percent.
In a U.S. Securities and Exchange Commission 8-K filing Friday, HPE said it had entered into a “put share agreement” to sell its 49 percent stake in H3C to Unisplendour International Technology Limited, a subsidiary of Unisplendour.
HPE shares were up 31 cents per share to $14.98 in mid-day trading on Friday.
[Related:HPE Is Selling Its 49 Percent Stake In H3C China Subsidiary]
The H3C sale opens the door for the cash windfall to be used by HPE for acquisitions or other activities.
Financial advisory firm UBS has said that while it expects some debt repayment and share buybacks it believes HPE “could use a large percentage of the proceeds to pursue a strategic transaction.”
In the 8-K filing, HPE its plans to use the cash for a range of activities including but not limited to “both organic and strategic investments, return of capital to shareholders, repayment and/or redemption of outstanding debt, and general corporate purposes.”
Ahmed Mosharafa, head of machine learning engineering at Machine Learning Reply, which is part of Italian IT services behemoth Reply with $1.3 billion in sales in euros and 13,000 employees, said he is looking forward to seeing how HPE uses the cash especially given the acquisitions that have set HPE up for success in the AI market with HPE Ezmeral.
“The technology behind MapR is still a beast,” he said, referring to the HPE acquisiton of MapR assets in 2019 that were critical in the buildout of the HPE Ezmeral platform.
Among the acquisitions HPE has made in the AI market besides MapR are BlueData in 2018, the $1.4 billion acquisition of Cray in 2019, Scytale in 2020 and Ampool in 2021.
Mosharafa said HPE has become more of a software powerhouse under HPE CEO Antonio Neri. He praised HPE’s commitment to innovation and partners as critical to driving the AI partnership with Reply. “The future is really bright,” he said. “I’m really looking forward to what we are going to do together in the AI domain.”
The original H3C joint venture – which has allowed HPE to successfully compete in the fast-growing China-based enterprise IT market- goes back to 2010 when Hewlett Packard acquired 3Com which had created H3C as a collaboration with Huawei.
In 2015, Tsinghua Holdings subsidiary, Unisplendour Corp., purchased a 51 percent stake in H3C, from Hewlett Packard at a $2.3 billion price tag. At that time, H3C had 8,000 employees and $3.1 billion in annual revenue made up of a complete portfolio of enterprise IT solutions, including networking, servers, storage and services.
The deal is subject to regulatory approvals and includes a provision requiring the two companies to “provide reasonable assistance” with regard to H3C for three years.