Daimler to ink final agreement to buy 12% of Beijing Auto unit

Article by Anita Panait, on November 19, 2013

Daimler will ink a final deal to acquire a 12-percent stake in Beijing Automotive Group Co.'s passenger-car unit on November 19, 2013. Beijing Auto is Daimler’s joint-venture partner in China. According to Beijing Auto chairman Xu Heyi, Daimler will sign the purchase agreement at the Beijing local government.

According to Daimler spokesman Hendrik Sackmann, both companies were "progressing well" and that the German carmaker will communicate more when the contracts are signed. Daimler earlier disclosed that it will receive two seats on the BAIC board as part of the deal, which also entails allowing the Chinese carmaker to build cars underpinned by platforms used to build Mercedes-Benz vehicles.

BAIC will also hike its ownership in a production joint venture to 51 percent from the current 50 percent. The Daimler-Beijing Auto’s joint venture recently commenced output at the first Mercedes passenger-car engine site outside of Germany in Beijing.

Xu remarked that Beijing Auto may "soon" invest in Daimler, depending on the market situation and the availability of funds. The deal with Daimler opens the way for BAIC to launch an initial public offering. It has already tapped investment banks like Goldman Sachs Group and UBS for the IPO, which could occur probably in Hong Kong, according to Xu.

The growth of Daimler’s Mercedes unit in China had been impeded by a distribution structure that divided deliveries of locally made and imported vehicles. To solve this, Mercedes combined the sales units in December 2012. Daimler disclosed in August 2013 that it will spend EUR2 billion ($2.7 billion) to double local production to over 200,000 vehicles.

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