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Geely may tap PE fund

By Li Fangfang (China Daily)
Updated: 2009-09-22 08:28

Customers inspect a Geely vehicle at an automobile market in Nanjing.[An Xin]

Geely Automobile Holdings Ltd, China's biggest privately owned carmaker's Hong Kong-listed arm, is in talks to sell $250-million worth convertible bonds and call warrants to a private equity fund of the Goldman Sachs Group Inc, according to media reports.

"The two sides have basically agreed on the investment in Geely already, but have yet to work out some technical details," Reuters reported yesterday citing a source with direct knowledge of the deal.

According to research firm FactSet Research Systems Inc, the investment is expected to give Goldman Sachs' PE fund 15 percent stake in Geely Auto.

Geely's listed arm plans to boost its production capacity through the investment, including tripling the annual output at its flagship car plant in Hunan to 150,000 units, and also to buy auto-related assets from its parent company, reported Financial Times.

A spokesman for Goldman Sachs in Hong Kong refused to comment. When contacted, Wang Ziliang, Geely Holding Group Co's vice-president, said: "If something happens, we will issue a statement."

Last Wednesday, Geely Auto shares were suspended at the Hong Kong Stock Exchange pending an announcement regarding the investment.

Its shares closed at HK$1.79 (23 cents) the day before its suspension, a decline of 3.24 percent.

Related readings:  Goldman fund to invest $250m in Geely: WSJ  Geely capital raising move may fund Volvo buyout bid  Geely, BAIC target foreign brands  Geely to top 1 year sales target as H1 profits rise 145%

On September 6, Gui Shengyue, executive president of Geely Auto, disclosed that its parent company, which has been eyeing Ford's Volvo, might probably acquire the Swedish luxury brand in alliance with financial institutions.

However, a Goldman Sachs insider told China Daily that even if that deal was done, the current investment would "do nothing for the Volvo bid, as the fund is little more than a drop in the acquisition ocean".

Hangzhou-based Geely Group has been involved in possible acquisition talks for Volvo since December last year. However, most industry analysts have doubted whether Geely, a small Chinese company, would be capable of paying huge money for Volvo.

Geely's total assets were at just over 14 billion yuan ($2 billion) last year. It earned a profit of 1 billion yuan. Geely's Chairman Li Shufu admitted earlier this year that the company had about 10 billion yuan in debt.

Another leading Chinese carmaker Chery Automobile Co said in June that it had raised 2.9 billion yuan from local private equity investors to boost its development and expansion plans.