Speculation is rife that IBM will sell its PC division after Legato, China's largest computer manufacturer, confirmed that it is making a bid for the assets of a "major international company in the IT industry".

In a statement to the Hong Kong Stock Exchange, Legato (formerly known as Legend) requested that its shares be suspended from trading pending an announcement of price sensitive information. Legato requested that trading in shares be resumed on 7 December at 9.30am.

"The company wishes to announce that it is in confidential discussions with a major international company in the information technology industry in relation to a possible acquisition by the company," said the statement.

"Such discussions are at an advanced stage but no definitive agreement or letter of intent has yet been signed by the parties, and there can be no assurance that any agreement or letter of intent will be signed."

Legato said that it wished to release a formal statement as soon as possible, and that a draft of the announcement is already with the Hong Kong Stock Exchange.

IBM has refused to comment on any speculation that it is selling its PC division, but an announcement is widely expected by the City tomorrow.