Reporters learned yesterday that dongfeng motor and fujian automobile industry group co., LTD (hereinafter referred to as "fuqi group") will sign a strategic cooperation framework agreement on the morning of May 16.
At present, the two companies have not disclosed the details of the agreement, but sources close to the top of the group said that the content of the agreement is that dongfeng motor will buy more than 40 percent of the equity of the group, which is not involved in the integration of the business of the group's subsidiaries such as southeast automobile, fujian Daimler and xinlongma.
Analysts said that if the acquisition is successful, the restructuring of dongfeng motor group will be another case of long-distance restructuring among the four auto groups, following the acquisition of nanjing automobile by Shanghai automotive group and the acquisition of changan automobile by changhe hafei. However, due to the complex shareholder composition, weak product reserves and weak dealer team, the outlook remains to be seen.
"Conditional" on becoming a major shareholder
Dongfeng motor insiders confirmed to our reporter yesterday that May 16 signing. The fujian provincial government will sell some of its stake in the company, according to the person, who declined to give a figure but said it was more than 40 per cent. The restructuring of dongfeng motor group was launched in July 2012. In 2012, xu ping, chairman of dongfeng motor group, zhu fushou, general manager of dongfeng motor group and others held talks with high-level officials of fujian provincial government in wuhan and reached preliminary intention. They sent delegations to inspect the overall business development and financial situation of the group and formed a memorandum of cooperation.
May 14, dongfeng motor group co., LTD. (00489.hk; Dongfeng motor group will issue 3 billion yuan of super-short-term financing notes to supplement its working capital from May 15, the company said in a statement. Shares of a-share listed company dongfeng motor (600006.sh) rose by the daily limit for two consecutive trading days, ending at 3.73 yuan on May 13. Trading was suspended yesterday.
People close to the group's top management said that on May 16, the deal could see dongfeng motor group acquire more than 40 percent of the group, and that the fujian provincial government would require dongfeng to buy the remaining shares when the group sells 300,000 vehicles a year.
Founded in 1992, fuqi group is a wholly state-owned company in fujian province, with an operating income of 10.26 billion yuan in 2012. Before 2010, the group has been committed to independent development, but the overall performance is poor. Baic had signed a framework agreement with foc to buy a stake in fujian Benz, but the deal fell through.
Fuqi group insiders, the group's vehicle companies only southeast automotive, xiamen golden dragon profit, fujian Daimler, the new long-established new longma company are in the state of loss. Due to the slow launch of products and other reasons, southeast auto sales growth is weak, in the competition at a disadvantage, the current sales of the largest product for 50,000 ~ 80,000 yuan ling yue V3 sedan.
At present, southeast automobile is the core asset of the group. In 2012, southeast automobile's operating revenue was 7.261 billion yuan, down from 2011, but its net profit and comprehensive income were 37.295 million yuan, up 11.28% year on year, and its asset-liability ratio was 43.62%.
Dongfeng expansion
Since 2012, dongfeng motor has increased its expansion efforts, successively establishing a joint venture with German getrak group to establish a passenger car transmission company, a joint venture with German Smith semi trailer company, and a commercial vehicle company with Volvo car. Dongfeng also plans to form a passenger car joint venture with Renault of France, pending approval from the national development and reform commission.
Earlier this year a work conference in 2013, in wuhan Zhu Fushou said it would "further use of global resources, actively participate in various kinds of merger, acquisition and reorganization, looking for strategic cooperation on a global scale and the chance of merger, acquisition and reorganization, steadily expand technology mergers and acquisitions, mergers and acquisitions and brand mergers and acquisitions platform, gather foreign first-class enterprise advantage resources and brand effect."
Dongfeng motor is the second largest auto group in China, with sales of 3.0785 million vehicles in 2012, including 2.455 million passenger cars and 623,000 commercial vehicles. Dongfeng motor has been in a leading position in the business of self-operated commercial vehicles in China. In the field of passenger vehicles, dongfeng motor has established joint ventures with nissan, Honda, psa Peugeot Citroen, yulon, and kia motors, and has such self-operated passenger vehicle companies as dongfeng fengshen and dongfeng fengfan.
Insiders at dongfeng motor said the restructuring of the group was in line with dongfeng's strategic need to develop "large autonomous" passenger vehicles, and that the mercedes-benz business segment of the group could fill dongfeng's gap in the luxury passenger vehicle sector, while the presence of southeast mitsubishi also opened the door for dongfeng to add a joint venture.
However, faw insiders said the future was uncertain as the framework agreement was only signed and due diligence would follow.
A senior executive of a consulting company in Shanghai pointed out that the shareholding of faw group is complex, and the restructuring involves the interests of Daimler Benz, mitsubishi and "zhonghua" and other related joint venture partners. Southeast automobile product reserves are weak, the dealer system tends to be rigid, fujian Daimler and new longma is still in the state of operating at a loss. After the restructuring, dongfeng motor should not only transfer funds to southeast auto, but also provide blood for it in terms of technology, products and management, and provide business growth opportunities, so as to ensure the smooth management and control after the restructuring and the revitalization of the group.