China’s FAW might acquire BMW partner Brilliance

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BMW’s main Chinese partner, Brilliance China Automotive Holdings Ltd might get acquired by the FAW Group in deals that may cost it some $7.2 billion, two people with direct knowledge of the matter told Reuters.

The shares of Brilliance soared as much as 25.6% to HK$7.99 following the news.

The potential acquisition by state-owned FAW, China’s No. 2 automakers, comes at a time when Brilliance’s top shareholder Huachen Automotive Group is on the brink of bankruptcy, having defaulted on $1 billion in debt obligations late last year.

The sources said that FAW would first purchase 30.43 per cent of Brilliance owned by Huachen and 11.89 per cent owned by the state-controlled Liaoning Provincial Transportation Investment Group. It would then make a mandatory bid for the rest of Brilliance’s shares. It is considering offering about HK$11 per share for the two-stage deal, representing a 70% premium to its average share price over the past month of HK$6.48.

FAW is looking at setting up an offshore investment vehicle and is seeking other investors, said the sources.

Huachen said the information was false but did not elaborate.

FAW (First Automobile Works) Group Corporation is a Chinese state-owned automotive manufacturing company headquartered in Changchun, Jilin, China. Its principal products are automobiles, buses, light, medium and heavy-duty trucks, and auto parts.