Business

Thursday September 24, 2009

Goldman investment boost for China’s Geely


HONG KONG: Goldman Sachs’ US$334mil investment in Geely Automobile Holdings will boost the Chinese vehicle maker’s global ambitions, including a potential bid by its parent for Ford’s Volvo brand.

Shares in Hong Kong-listed Geely spiked 26% yesterday after the company said it would issue convertible bonds and warrants to an affiliate of Goldman and would use proceeds for capital expenditure, working capital and potential acquisitions.

The addition of Goldman as a major investor could help China’s 10th largest vehicle maker achieve its aspirations to secure global brands and technology from struggling Western rivals, said Yi Junfeng, an analyst with Changjiang Securities.

“It’s a wise move for Geely as it can use the money to build up capacity and free up capital for its parent, which has publicly announced its interest in Volvo,” Yi said.

Earlier this month, Geely said its parent, Geely Group Holdings Co, planned to bid for Sweden’s Volvo which media reports have valued at close to US$2bil. Geely Group has also approached Magna International about a potential production partnership on General Motors’ European brand Opel, a source familiar with the matter told Reuters last week.

For Goldman, which could end up with 15.1% of Geely if it fully converts the bonds and warrants, the investment will give it exposure to China’s fast-growing vehicle market – the world’s largest.

“We hope Goldman can help us to improve our operating efficiency, and that Goldman’s network will help in our long-term development,” said Geely executive director Lawrence Ang at a company shareholder meeting for an unrelated matter.

Geely will raise a total of HK$2.59bil (US$334mil) by issuing convertible bonds and warrants to GS Capital Partners VI Fund LP, an affiliate of Goldman Sachs.

Ang said money raised from the bond sale could be used to buy car-making plants from its privately held parent, which typically builds such plants and sells them to the listed company. — Reuters

Geely, which competes against Chery Automobile and other local brands, has said it plans to nearly double its car-making capacity to 685,000 units a year in the next few years.

Hangzhou-based Geely posted 35% sales growth in the first eight months of the year to 185,000 units. China has been one bright spot in an otherwise struggling vehicle industry and is on track to post record sales this year.

Several Chinese vehicle makers have moved to expand their global presence through deals with cash-strapped US and European firms. — Reuters

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