According to insiders, the second largest Chinese car manufacturer FAW is reaching for the local one BMWPartner Brilliance. The state-owned FAW Group, which also works with Volkswagen and Audi Cars produced for the Chinese market could spend around six billion euros on a proposed takeover, reports the news agency Reuters on Wednesday exclusively. The agency relies on two people who are familiar with the plans.
The background to the considerations is the precarious situation of the largest shareholder and parent company of Brilliance, Huachen Automotive, which got into trouble at the end of 2020. According to the plan, FAW will initially acquire 30.4 percent of the Brilliance shares from Huachen and a further 11.9 percent from a state-owned investment company in Liaoning Province.
Joint venture an important source of income
The second step would be a takeover offer to the remaining Brilliance shareholders, which could be around 11 Hong Kong dollars, 70 percent above the average price in January. On Wednesday the shares were quoted at 6.70 Hong Kong dollars. FAW is trying to get more investors on board for the takeover. FAW and BMW did not want to comment on the information, Brilliance was not available for comment. The flourishing joint venture BMW Brilliance Automotive (BBA) in Shenyang is one of the most important sources of income for both partners. Among other things, it manufactures BMW’s iX3 electric SUV, which is exported from China to Germany.
Huachen rejected the information. Reuters had found out in Septemberthat a consortium around the investment company from Liaoning was working on a consortium of state-owned companies that wanted to take over Brilliance and take it off the stock exchange. A source said the plan was on hold because of funding issues and disagreement over valuation.
Problems escalated late last year
Brilliance’s problems came to a head in mid-November last year when the creditors of the major shareholder Huachen Automotive Group applied for a restructuring. The background to this was that a bond that had matured could apparently not be serviced. BMW stated in November to the “Handelsblatt”that you watch the development very closely, but you don’t see any negative effects on the joint venture. The operative business is going according to plan. Operationally, Brilliance is also little involved in the production process, only a relationship exists through the delivery of pressed parts.
China is always important to BMW: Because overall solid business in China was able to cushion the corona-related slump in sales in 2020. Of a total of over 2.3 million cars sold (-8.4 percent), around a third of the vehicles were sold in China. The People’s Republic is by far the most important single market for BMW, as it is for the premium competitor Daimler. Most of the BMWs sold in China came from the BBA joint venture.