AOL stakes claim in China
By Vivian Chu, CBS.MarketWatch.com
Last Update: 5:12 AM ET May 30, 2001
Under the terms, AOL Time Warner (AOL: news, msgs, alerts) and Legend Holdings (LGHLY: news, msgs, alerts) will each contribute $100 million to the joint venture, in which Legend will own a 52 percent stake and AOL the remaining 48 percent, reported the state-run China Daily. The joint venture will be announced in Beijing next week, it added.
Since Chinese government restrictions prevent AOL from operating in the mainland, the joint venture initially won't provide AOL-branded Internet content. The venture will first provide support for Legend customers through Legend's Web site, FM365.com. But once China joins the World Trade Organization, the venture will buy an equity stake in FM365.com, according to the paper.
Marketing plans for the venture include a Web pop-up on FM365.com and an AOL desktop icon to be displayed on Legend PCs, said the paper.
A Legend spokeswoman declined to comment on the report. An AOL spokesman was not immediately available for comment.
Such a joint venture would cap months of talks between the two companies. Both sides would stand to benefit, with AOL gaining instant access to and visibility in China's exploding Internet market through Legend, the country's number one PC vendor. AOL started its business in Hong Kong in 1999, but has yet to launch in mainland China.
Meanwhile, Legend would acquire AOL's technology and marketing know-how, content, and funding. The tie-up would also help it in its strategy to diversify away from being a PC manufacturer into other businesses.
Earlier this week, Legend listed its foreign PC distribution arm Digital China Holdings on Hong Kong's main stock exchange, in an IPO that raised $41.6 million. It's also reportedly in talks to buy a large stake in a mainland Chinese mobile phone parts marker.
Shares of Legend Holdings sank 3.5 percent to 5.45 Hong Kong dollars. The broader Hang Seng Index ended down 1.54 percent.
Vivian Chu is a reporter for CBS.MarketWatch.com in Hong Kong.
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