13 May, 2019

BAIC looking to take a stake in Daimler

Chinese carmaker BAIC is looking to buy a stake in Germany’s Daimler as it seeks to secure investments in a joint venture in the country.

The manufacturer is looking to buy a stake of 4-5% in in the German company and announced its intention to do so earlier this year, according to sources close to the matter. BAIC has also asked local authorities in Beijing to support a stake purchase.

Neither company has commented on the reports.

A 5% stake in Daimler would cost BAIC around €3 billion, with Daimler’s closing market value last week at €57.6 billion. It is believed that the Chinese carmaker is acquiring shares through the stock exchange. However, German regulatory filings do not show BAIC as a significant shareholder of Daimler. German takeover rules allow a buyer to acquire a stake of up to 3% before a regulatory disclosure is required.

Daimler has ruled out issuing new stock to help an outside party build a stake, forcing potential buyers to acquire shares on the market.

Increased interest

BAIC has been interested in taking a stake in Daimler since 2015 and has pushed ahead with these plans following the announcement last year that Li Shufu, chairman of rival Chinese carmaker Geely, built up a 9.69% shareholding in the German manufacturer, becoming its largest shareholder in the process.

Shufu was able to keep his plan concealed, using Hong Kong shell companies, derivatives, bank financing and structured share options. This meant BAIC had no opportunity to react until the deal was already concluded.

The move by Shufu was intended to help Geely develop its electric and hydrogen vehicle technology with help from Daimler, which recently started production of its first electric vehicle, the EQC.

Shared ventures

In March, Daimler agreed to build its next generation of Smart branded vehicles with Geely, as the Chinese company, which also owns Volvo and LEVC, took a 50% stake in the marque. The German manufacturer, which also owns Mercedes-Benz, had been considering its options over the city-car brand.

Daimler has also reassured BAIC that any new industrial alliances involving Mercedes and a Chinese partner would only happen after a consensus is found with BAIC.

Daimler currently owns 30.4% of BAIC shares listed on the Hong Kong Stock Exchange, representing a total stake of 9.55% of its Chinese partner, according to the BAIC Financial Report of June 2018.

Daimler also owns 49% of Beijing Benz Automotive, its main joint venture with BAIC and 3.93% of Beijing Electric Vehicle, a subsidiary of BAIC.