FAW Group is buying Brilliance China Automotive Holdings for about $7.2 billion in a two-stage deal that might see BMW’s foremost Chinese language associate taken personal, two individuals with direct information of the matter advised Reuters.
Brilliance shares soared by as a lot as 1 / 4 in worth following the information.
The potential acquisition by state-owned FAW, China’s No. 2 automaker, comes at a time when Brilliance’s high shareholder Huachen Automotive Group is getting ready to chapter, having defaulted on 6.5 billion yuan ($1 billion) in debt obligations late final yr.
Beneath plans being mentioned, FAW would first buy 30.43% of Brilliance owned by Huachen and 11.89% held by the state-controlled Liaoning Provincial Transportation Funding Group, mentioned the sources.
It might then make a compulsory bid for the remainder of Brilliance’s shares. It’s contemplating providing about HK$11 per share for each levels of the deal, representing a 70% premium to its common share worth over the previous month of HK$6.48.
To conduct the deal, FAW is establishing an offshore funding car and is inviting different buyers to take part, mentioned the sources, who declined to be recognized because the discussions have been confidential.
FAW and BMW declined to remark. Brilliance and Liaoning Provincial Transportation Funding Group didn’t reply to requests for remark.
Huachen mentioned the knowledge was false however didn’t elaborate. Liaoning province’s state asset regulator, which owns a majority stake in Huachen, mentioned it has not been involved with FAW a few potential take-private deal for Brilliance.
Reuters reported in September that Liaoning Provincial Transportation Funding Group was planning to guide a consortium of Chinese language state-backed buyers to take Brilliance personal. Nonetheless, the plan has been placed on maintain resulting from variations in valuations and financing difficulties, mentioned one of many individuals.
Brilliance, based mostly in Shenyang, the capital of Liaoning province, and BMW have 50-50 three way partnership, BMW Brilliance Automotive, which accounts for almost all of Brilliance’s earnings. However BMW plans to carry its stake by one other 25% for 3.6 billion euros subsequent yr, taking management of the enterprise.
Primarily based on that plan, first introduced in 2018, Brilliance’s stake is value 7.2 billion euros ($8.7 billion), way over its present market worth. Brilliance’s shares completed Wednesday commerce 13% larger, giving it a market capitalisation of round $4.7 billion.
Huachen’s debt woes have weighed closely on Brilliance and the sources mentioned potential buyers imagine that the corporate is undervalued.
Earlier than Wednesday, it was buying and selling at 2.Eight instances ahead earnings, far beneath the business’s median a number of of 14, in accordance with Refinitiv knowledge.
Brilliance additionally owns 51% of a enterprise with France’s Renault SA making vans and sport-utility automobiles, and has a stake in an auto-financing agency.
FAW, based mostly in Changchun, Jilin province, companions with Volkswagen AG and Toyota Motor Corp to make passenger automobiles in China. It additionally makes heavy responsibility vehicles underneath its personal model.
The potential acquisition would add to a surge in offers the place strategic buyers and buyout companies have tapped Hong Kong firms for take-private alternatives. Consumers typically cite undervalued shares as a motive for the offers.
The whole worth of buyouts of Hong Kong-listed firms reached $25 billion final yr, up 190% from 2019 and the very best stage since 2017. The variety of such transactions – at 60 – was additionally an annual report, Refinitiv knowledge confirmed.