Exclusive: VW eyes buy large share in China partner JAC, cranes Goldman – sources

HONG KONG / FRANKFURT (Reuters) – Volkswagen AG is investigating to buy a large stake in its Chinese electric cars joint venture partner JAC Motors and has tapped Goldman Sachs as an advisor on the plan, people with direct knowledge of the case said.

Moved by VW, the largest foreign car manufacturer in China, for Buying for Anhui Jianghuai Automobile Group (JAC Motors), the last step of foreign car manufacturers is to increase their efforts in their Chinese joint venture partners or in the ventures even since Beijing relaxed ownership rules last year in the world's largest car market.

Rival German automaker BMW agreed in October to buy control of its home country company for $ 3.6 billion ($ 4.05 billion). Daimler AG also plans to increase its stake in local partner BAIC Motor.

Foreigners were previously prevented from controlling any Chinese automaker or joint venture. Beijing last year removed such caps for companies that produce fully electric and plug-in hybrid cars. Restrictions on commercial vehicle makers easily in 2020 and by 2022 for the broader car market.

VW, which has a market value of EUR 75 billion, is currently not a shareholder of the Shanghai listed JAC, which has a market capitalization of around $ 1.7 billion, according to Refinitiv data.

The German car giant's plans are at an early stage, but it is keen to make a big effort, said three of the people. Two of them said it would seek to buy shares from JAC's major shareholders, which are mainly government-backed companies that own over 40 percent, Refinitive data showed.

JAC's parent, Anhui Jianghuai Automobile Group Holding, has a 24 percent stake and is fully managed by the municipality.

When contacted by Reuters, VW said: "We are closely following what the implications are for our business and for our business partners. In this regard, we will explore every possible alternative with all stakeholders to ensure long-term success in China." 19659004] JAC and its parent did not respond to comment requests. Goldman refused to comment. People refused to be identified as the case was confidential.

JAC trades in a demanded ratio of 0.84, which means that VW must pay shares for shares since JAC's owners cannot sell shares below book value.

The Chinese automaker's stock jumped and hit the daily 10 percent maximum increase on Wednesday afternoon. VW shares were indicated to start trading flat.

VW IN CHINA

Wolfsburg-based VW, which delivered 4.21 million cars in mainland China and Hong Kong last year, has operated in China for decades and, in addition to JAC, has joint ventures with state FAW Group and SAIC Motor.

It formed its 50:50 JV with JAC in 2017 to investigate and develop zero-passenger cars, when the German machine has committed nearly one-third of the industry's EV expenses, about $ 91 billion, and is investing heavily in the Chinese market.

It seems to shift much of its planned EV production in China to the JAC if it ends up driving the local automaker after a stake purchase, one of the people said.

In January, JAC warned of a net loss of 770 million yuan for 2018, mainly due to a decline in car sales, compared to a profit of 432 million yuan in 2017.

Without exceptional items such as government grants, losses will reach 1.9 billion yuan, the company said. It will release annual results on April 30th.

China last month increased its EV subsidies among worries such as generous local support designed to produce regional industrialists, contributing to overcapacity and inefficiency.

JAC, China's 11th largest group car salesman, produces a variety of commercial vehicles, including pickups and trucks. It also produces vehicles for electric car manufacturer NIO Inc, one of Tesla Inc.'s rivals in China.