SAIC Motor buys 6 percent stake in GM Korea from parent

ERJ staff report (AN)

Beijing (Bloomberg) -- SAIC Motor Corp., China's largest automaker, is buying its parent company's 6 percent stake in GM's South Korean unit as part of several acquisitions announced today.

SAIC Motor also agreed to buy parts makers and other businesses from its parent for 32 billion yuan ($4.9 billion) in stock to gain control of supplies and speed development of new models.

The company, which makes cars in China with General Motors Co., is acquiring the 6 percent stake in GM's South Korean unit as part of the deal, it said in a stock exchange statement today. Shanghai-based SAIC will pay for the purchase by issuing 1.73 billion new shares, it said.

The acquisition may help SAIC develop electric and hybrid vehicles as the government supports fuel-efficient cars to curb pollution and pare fuel imports in the world's largest auto market.

China's state-controlled companies are also being encouraged to sell assets to listed units to improve financial transparency.

"SAIC will be able to work more closely with parts suppliers by taking a stake," said Han Weiqi, an analyst at CSC International Holdings Ltd. in Shanghai. "The deal is also in response to government calls to reorganise the auto industry."

Under the deal, SAIC will get parent Shanghai Automotive Industry Corp.'s 60 percent stake in Shanghai-listed parts maker Huayu Automotive Systems Co. It will also acquire businesses working on alternative-energy vehicles, as well as export and logistics companies.

The transaction is in line with "the government's general direction to improve the securitisation of state-owned assets," Judy Zhu, a SAIC spokeswoman in Shanghai, said today.

GM-SAIC ties

The acquisition of the GM Korea Co. stake further tightens SAIC's ties with GM. The automaker already has two automaking ventures in China with GM and a stake in the Detroit-based company's Indian unit. SAIC also bought $500 million of shares in GM's initial public offering last year.

SAIC, which also operates a joint venture with Volkswagen AG, more than doubled net income last year to 13.7 billion yuan, as vehicle sales jumped 32 percent to 3.58 million.

Industrywide China auto sales grew by the same amount. The company expects to boost vehicles sales about 12 percent this year to 4 million, helped by demand for VW Passat sedans, Buick Excelle compacts and its own-brand Roewe sedans.

SAIC valued the shares it will issue to its parent at 16.53 yuan apiece, the average price in the 20 trading days before being suspended, according to the statement. The deal will boost Shanghai Auto's stake in the company to 77 percent from about 73 percent, it said.

China auto sales

Vehicle sales have slowed in China this year after the government reinstated a 10 percent sales-tax on small cars and phased out subsidies for trade-ins in rural areas. The government will also start controlling vehicle ownership in cities of more than 10 million people from 2011 through 2015 to help ease jams and air pollution, the Economic Observer said last month citing an unidentified person.

SAIC had a domestic market share of about 20 percent last year, it said last month. Dongfeng Motor Group Co., which makes cars with Honda Motor Co. and Nissan Motor Co., had a share of about 11 percent, according to figures from the company and the China Association of Automobile Manufacturers.

From Automotive News (A Crain publication)