Geely raises Goldman cash as Volvo bid mulled
- Source: Global Times
- [08:02 September 24 2009]
- Comments
Geely Auto plans to use the Goldman Sachs investment to fund its working capital as it expands. Above, a Geely worker on the assembly line of the Emgrand EC718 in China this past July. [BloombergNews]
Geely Automobile's global ambitions were buoyed on Wednesday by a $334 million investment from Goldman Sachs, as the Chinese firm's parent considers a bid to buy Volvo from US car giant Ford.
Geely Automobile said it was selling bonds and warrants worth a total of HK$2.59 billion ($334 million) to GS Capital Partners VI Fund, a private equity fund controlled by the US investment bank.
The Goldman Sachs fund would end up with a 15.1 percent stake in Hong Kong-listed Geely if it fully converts the bonds and warrants into stock, the privately-owned automaker said in a statement.
Under Chinese regulation, a foreign partner's stake in an auto joint venture must not exceed 50 percent.
Geely said it plans to use the money to "fund capital expenditures, potential acquisitions and for general corporate purposes".
Its shares opened 26 percent higher yesterday at HK$2.25, after being suspended since September 16 pending the announcement.
Parent company Geely Holding Group said two weeks ago that it may bid for Ford's loss-making Volvo unit in partnership with an unspecified State-owned investment company.
Chinese carmakers are on the hunt for foreign deals as competition intensifies on their fast-growing home turf.
State-run Beijing Automotive Industry Holding Co (BAIC) is teaming up with Swedish sports car maker Koenigsegg to buy Saab from troubled General Motors, Koenigsegg said September 9.
Little-known Sichuan Tengzhong Heavy Industrial Machinery signed a tentative agreement with GM in June to buy the Hummer nameplate.
BAIC was involved in talks to buy GM's Opel unit, but the US giant said this month it was selling the German-based division to Canadian auto parts maker Magna and Russia's Sberbank.
"It's good news for Geely that a big investment bank is upbeat on the company's outlook," said John Zeng, a Shanghai-based auto analyst with IHS Global Insight.
"Geely has been accelerating the release of new products in recent years, particularly this year. Its plants in Chengdu and Shandong are starting operations. It's under big pressure to get more working capital and raise funds."
However, Zeng said the deal might not be directly related to the possible Volvo bid, as "the proceeds would not be adequate to obtain Volvo, which was valued at $2-3 billion."
Geely's sale to Goldman included HK$1.9 billion ($245 million) worth of bonds and 299.5 million warrants. It will raise further funds once Goldman pays to convert those securities into shares.
The bonds can be converted into shares at $1.90, representing a premium of about 6.1 percent to Geely's last stock closing price of $1.79, the company said.
There is a 28.5 percent premium to the closing price on the warrants, which can be converted for $2.30 each.
AFP
