HP Sells 51 Percent Stake in H3C Chinese Networking Business to Tsinghua Holdings for $2.3 Billion

Hewlett-Packard (HPQ) has sold controlling interest in its Hangzhou-based H3C Technologies to Tsinghua Holdings for $2.3 billion.

Tsinghua Holdings is the asset arm of Tsinghua University in China. Under terms of the agreement, Unisplendour Corp., a subsidiary of Tsinghua Holdings, will buy a 51 percent stake in a newly-constituted H3C combining H3C Technologies and HP’s China-based server, storage and technology services business. The deal, net of cash and debt, is valued at $4.5 billion, HP said.

HP said it will will retain its existing China-based Enterprise Services, Software, HP Helion Cloud, Aruba Networks, Printing and Personal Systems businesses.

In addition to a 49 percent stake in the new H3C, HP will retain the right to name H3C’s chairman and chief financial officer, the Wall Street Journal reported.

Meg Whitman, HP chairman and chief executive, predicted the new H3C will be a strong technology competitor in China. The new company will offer a line of enterprise IT solutions, including networking, servers, storage and services, HP said.

“Partnering with Tsinghua, one of China’s most respected institutions, the new H3C will be able to drive even greater innovation for China, ” Whitman said. “In one move, we have repositioned HP and H3C to accelerate overall performance and better serve our customers and partners.”

The new H3C will employ some 8,000 people, including about 2,500 engineers. Prior to the sale H3C generated CY 2014 sales of $3.1 billion, $0.4 billion in operating profit and GAAP net income of $0.3 billion.

Unisplendour, which operates as a publicly-traded subsidiary of Tsinghua Holdings, will maintain the new H3C as a division. Unisplendour is regarded among the top software vendors and system integrators in China, and has maintained a distribution partnership with HP since 1999.

Upon the deal’s expected close at the end of this year, the new H3C will serve as the exclusive provider in China of HP’s server, storage and networking portfolio, along with its hardware support services.

In the interim, Henry Tso will continue to run the H3C Technologies business. Ye Jian will continue to lead HP China’s Server, Storage and Technology Services businesses.

In addition, Robert Mao will remain chairman of HP China. All three executives will be actively involved in picking the management team for the new H3C, HP said.

“Tsinghua and Unisplendour, as the majority shareholder of the new H3C, will embrace and welcome the new H3C to the family of the China domestic IT industry,” said Weiguo Zhao, Tsinghua Unigroup and Unisplendour chairman. “The transaction for H3C will also release great potential in the China market,” he said.

Word first surfaced last October that HP was huddling with private equity firms in China to sell off controlling interest in its local corporate networking business. HP gained control of H3C when it bought 3Com for $2.7 billion in 2010, an acquisition that substantially expanded its Ethernet switching offerings, added routing solutions and strengthened its position in China.

The Wall Street Journal reported in March that HP was closing in on a deal to sell the unit.