China's Geely buys US$9bil Daimler stake

Li Shufu acquired the 9.7 percent holding through Geely Group

Li Shufu acquired the 9.7 percent holding through Geely Group

BEIJING: The founder of Zhejiang Geely Holding Group Co. has accumulated a stake worth about 7.3 billion euros ($9 billion) in Daimler AG, marking the biggest investment in a global automobile manufacturer by a Chinese company.

Li Shufu acquired the 9.7 percent holding through Geely Group, a company owned by the billionaire and managed by his carmaking group, according to a company statement Saturday. 

Bloomberg News first reported that Geely has become the single largest investor in the parent of Mercedes-Benz by building up a position of just under 10 percent through purchases in the stock market in recent weeks.

The investment furthers Hangzhou-based Geely’s foray into the European premium automotive market and ends months of speculation about a tie-up. 
The Chinese company already owns Volvo Cars AB, whose refreshed line-up of vehicles have made it a popular alternative to the German luxury stalwarts.

“A Geely stake in Daimler would underscore their push for cooperation that’ll help them get more expertise, like electric cars,” said Frank Biller, a Stuttgart-based analyst with Landesbank Baden-Wuerttemberg. “At the same time, this opens another path into China for Daimler.”

Li has tapped overseas banks to help finance the investment, according to people familiar with the matter. In its statement, Geely said Li has a "long-term commitment" to the Daimler stake, and that neither Geely Group nor any other company in the Zheijang Geely Holding Group intend to acquire additional shares for now.

Daimler, which said it welcomes another major investor, has been on an upward trajectory, reclaiming the No. 1 spot in luxury cars from BMW AG by broadening its offerings to include more SUVs and freshening its lineup with sportier designs. The Stuttgart-based carmaker sees the investment as a vote of confidence, spokesman Joerg Howe said by phone.

“Li Shufu is a Chinese entrepreneur Daimler knows well and regards highly in terms of his competency and focus on future developments,” Howe said. “Daimler already has a strong footing in China. We have a very strong partner with our existing cooperation with BAIC Motor.”

Chinese companies have been more active buying into German companies in recent years. HNA Group Co., the aviation-to-hotel conglomerate, has a stake of about 8.8 percent in Deutsche Bank AG, and industrial-robot maker Kuka was purchased by Midea, the world’s largest appliance maker.

In December, Li became the biggest shareholder in Sweden’s Volvo AB, the world’s second-largest truckmaker. In 2010, he acquired Volvo Cars from Ford Motor Co., and last year won control of British sports-car maker Lotus Cars Ltd.

The Chinese firm, which controls Hong Kong-listed Geely Automobile Holdings Ltd., has ambitious expansion plans for both its home market and overseas as it takes on global car majors. Geely plans to start selling a compact five-seat SUV, currently marketed under the Lynk & Co brand, outside China from mid-2019. It’s likely to look first at Europe.

Daimler itself is planning the biggest corporate overhaul in a decade, firming up plans toward the end of 2017 to break up its rigid conglomerate structure, instead creating a holding company with three separate units: Mercedes-Benz Cars & Vans, Daimler Trucks & Buses and the financial-services division. 

While Daimler said the move isn’t a prelude to a spin-off of any of the businesses, some investors have called on the company to consider an eventual split on the back of the clearer delineation between the units.

Kuwait’s sovereign wealth fund, which has been an investor in Daimler for decades, was the largest stakeholder in the automaker as of the end of December with a 6.8 percent holding. 

“The competitors which technologically challenge the global car industry in the 21st century are not part of the automotive industry today," Li said in the statement.

"But with challenges come opportunities. No current car industry player will be able to win this battle against the invaders from outside independently. In order to succeed and seize the technology highland, one has to have friends, partners, and alliances and adapt a new way of thinking in terms of sharing and united strength," he said. - Bloomberg

Corporate News , Auto