Chinese state-owned automotive design and manufacturing giant SAIC Motor Corporation Limited announced that its Hong Kong-based unit SAIC HK is acquiring a 28.92% stake in HK-listed troubled car rental service provider CAR Inc for as much as HK$1.902 billion ($245 million).
CAR’s former actual controller Zhengyao Lu, the founder of scandal-tainted Luckin Coffee, will not hold any shares in the firm following the deal. Lu resigned from the post of Chairman on June 10.
According to a company announcement on Friday, SAIC HK signed an agreement with CAR’s five shareholders including UCAR Limited, UCAR Service Limited, UCAR Technology Inc and U.S private equity firm Warburg Pincus’ subsidiary Amber GEM Holdings Limited on July 2.
Amber GEM had planned to buy a total of 17.11 per cent stake in CAR at a combined $145 million earlier in April.
SAIC HK will buy up to 613,377,424 common shares in CAR at a price of HK$3.1 ($0.4) apiece.
Upon the completion of the transaction, SAIC will be the largest shareholder in CAR.
Shanghai-based SAIC, which went public in Shanghai in 1997, manufactures and distributes passenger and commercial vehicles. It has sold 6.24 million units in 2019, accounting for 22.7 per cent market share in China. Its new energy vehicle sales grew 30 per cent to 185,000 last year.
SAIC clocked annual revenues of 843 billion yuan ($119 million) in 2019 and 902 billion yuan ($128 billion) in 2018, according to the bourse.
With the deal, SAIC is seeking to accelerate its expansion to car rental, while it will also support CAR’s recovery from the crisis.
CAR, which was co-founded by Lu in Beijing in 2007, primarily operates long and short-term car rental business. As of December 2019, it recorded annual earnings of 7.69 billion yuan ($1.09 billion) and 30.78 million yuan ($4.35 million) in net profit. CAR got listed in Hong Kong in 2014 but its share value has dropped significantly after Luckin confirmed the fraud in April.