The billionaire founder of Zhejiang Geely Holding Group Co. has accumulated a stake worth about 7.3 billion euros ($9 billion) in Daimler AG, marking the biggest investment in a global automobile manufacturer by a Chinese company.
Li Shufu acquired the 9.7 percent holding through Geely Group, a company owned by the 54-year-old and managed by the carmaker he controls, according to a statement Saturday. Bloomberg News first reported that Geely has become the single largest investor in the parent of Mercedes-Benz by building up a position of just under 10 percent through purchases in the stock market in recent weeks.
The investment furthers Hangzhou-based Geely’s foray into the European premium automotive market and ends months of speculation about a tie-up with Daimler. The Chinese company already owns Volvo Cars AB, whose refreshed line-up of vehicles have made it a popular alternative to the German luxury stalwarts.
“A Geely stake in Daimler would underscore their push for cooperation that’ll help them get more expertise, like electric cars,” said Frank Biller, a Stuttgart-based analyst with Landesbank Baden-Wuerttemberg. “At the same time, this opens another path into China for Daimler.”
Geely financed the deal through a combination of debt, equity and financial instruments overseas and didn’t use domestic funds in China, Chief Financial Officer Li Donghui told CCTV in an interview. He said the actual cost for the stake is lower than its market value, without elaborating. In its statement, Geely said Li has a “long-term commitment” to the Daimler stake, and neither Geely Group nor any other company in the Zheijang Geely Holding Group intend to acquire additional shares for now.
A Chinese Car Built in Western Europe? Geely Could Be First
Daimler, which said it welcomes another major investor, has been on an upward trajectory, reclaiming the No. 1 spot in luxury cars from BMW AG by broadening its offerings to include more SUVs and freshening its lineup with sportier designs. The Stuttgart-based carmaker sees the investment as a vote of confidence, spokesman Joerg Howe said by phone.
“Li Shufu is a Chinese entrepreneur Daimler knows well and regards highly in terms of his competency and focus on future developments,” Howe said. “Daimler already has a strong footing in China. We have a very strong partner with our existing cooperation with BAIC Motor.”
Chinese companies have been more active buying into German companies in recent years. HNA Group Co., the aviation-to-hotel conglomerate, holds a minority stake in Deutsche Bank AG, and industrial-robot maker Kuka has been taken over by Midea, the world’s largest appliance maker.
Expansion Ambitions
In December, Li became the biggest shareholder in Sweden’s Volvo AB, the world’s second-largest truckmaker. In 2010, he acquired Volvo Cars from Ford Motor Co., and last year won control of British sports-car maker Lotus Cars Ltd.
The Chinese firm, which controls Hong Kong-listed Geely Automobile Holdings Ltd., has ambitious expansion plans for both its home market and overseas as it takes on global car majors. Geely plans to start selling a compact five-seat SUV, currently marketed under the Lynk & Co brand, outside China from mid-2019. It’s likely to look first at Europe.
Eventual Split?
Read this Gadfly column on what Daimler gets out of Geely’s investment
Daimler itself is planning the biggest corporate overhaul in a decade, having firmed up plans toward the end of 2017 to break up its rigid conglomerate structure, instead creating a holding company with three separate units: Mercedes-Benz Cars & Vans, Daimler Trucks & Buses and the financial-services division. While Daimler said the move isn’t a prelude to a spin-off of any of the businesses, some investors have called on the company to consider an eventual split on the back of the clearer delineation between the units.
Germany is aware of the investment and sees no need to use competition or foreign investment rules to intervene, according to a government official. Kuwait’s sovereign wealth fund, which has been an investor in Daimler for decades, was the largest stakeholder in the automaker as of the end of December with a 6.8 percent holding.
“The competitors which technologically challenge the global car industry in the 21st century are not part of the automotive industry today,” Li said in the statement.
“But with challenges come opportunities. No current car industry player will be able to win this battle against the invaders from outside independently. In order to succeed and seize the technology highland, one has to have friends, partners, and alliances and adapt a new way of thinking in terms of sharing and united strength,” he said.
— With assistance by Ruth David, Vinicy Chan, Eyk Henning, Ying Tian, Dinesh Nair, Elisabeth Behrmann, Benedikt Kammel, Linly Lin, Birgit Jennen, Steve Geimann, and Chitra Somayaji
Source: Bloomberg