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Chinese Automaker BAIC is Planning to Raise its Stake in Daimler to Become its Biggest Shareholder

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【Summary】Mercedes Benz parent Daimler’s Chinese joint venture partner Beijing Automobile Group Co Ltd (BAIC) is looking to increase stake in the Stuttgart-based automaker in a bid to become a bigger shareholder than its rival Zhejiang Geely Holding Group (Geely). According to a report from Reuters, BAIC plans to double its stake in Daimler to around 10% and also secure a board seat with the German luxury automaker.

Eric Walz    Dec 16, 2019 10:50 AM PT
Chinese Automaker BAIC is Planning to Raise its Stake in Daimler to Become its Biggest Shareholder
The entrance to the Beijing-Benz auto plant in Beijing (Photo: Reuters)

For over twenty years, global automakers, including Mercedes Benz parent Daimler, have established joint ventures with Chinese automakers in order to gain access to China's auto market, which is the world's biggest. 

When China joined the World Trade Organization in 2001 and opened itself up to global trade, it required that foreign automakers own no more a 50% stake in a joint venture with any Chinese carmaker. The rule was meant to protect Chinese automakers from an onslaught of foreign competition. Over the years however, that didn't stop state-backed automakers in China from investing in foreign automakers to boost their joint ventures.

Now, Daimler's Chinese joint venture partner Beijing Automobile Group Co Ltd (BAIC) is looking to increase stake in the Stuttgart-based automaker in a bid to become a bigger shareholder than its rival Zhejiang Geely Holding Group (Geely). 

Geely separately acquired Swedish automaker Volvo.

BAIC has already started buying the German company's shares on the open market, sources told Reuters who were briefed on the plans.

BAIC is currently Daimler's third largest shareholder. By securing a stake of 10% it will become Daimler's biggest shareholder, surpassing Geely, which owns 9.69% in the German automaker.

Also by increasing its stake, BAIC is looking to secure a seat at Daimler's supervisory board, which Geely does not currently have, the sources told Reuters. BAIC is also seeking to expand its partnership with Daimler in China.

BAIC has been Daimler's main partner in China for years and operates Mercedes-Benz factories in Beijing through the two automakers' main joint venture, Beijing Benz Automotive. 

A third source familiar with BAIC's plans said that the company wanted to be a bigger shareholder than Geely in Daimler in order to be seen as the German automaker's senior-most partner in China.

BAIC built up its 5% Daimler stake after Li Shufu, chairman of rival Geely, built a 9.69% stake in Stuttgart-based Daimler in early 2018.

Shufu used various Hong Kong shell companies, derivatives, bank financing and structured share options, to keep his plan under wraps until he was able to amass a nearly 10% stake in Daimler, then pubically announcing that he's become Daimler's largest shareholder.

Daimler is remaining quiet on the planned investment from BIAC. When asked by Reuters, Daimler said it had not received any notification about BAIC's intentions to raise its stake. 

Daimler's China chief Hubertus Troska said on Friday "we welcome long-term investors in Daimler". Asked about BAIC and its potential to become a larger shareholder, he added, "we like each other. Let us see how things develop."


resource from: Reuters

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