Proton ends equity tie-up with Goldstar and Lotus
JV company fails to get manufacturing licence within timeframe
PETALING JAYA: Proton Holdings Bhd has terminated an equity joint-venture contract (EJVC) signed on April 17, 2015 with Goldstar Heavy Industrial Co Ltd and Lotus Grand International Ltd (LGIL) to produce and sell Lotus cars in China.
Proton is a 50.1% subsidiary of DRB-Hicom Bhd.
DRB-Hicom said the agreement was terminated as the JV company, Goldstar Lotus Automobile Co Ltd (GLAC), still had not obtained the required manufacturing licence.
The deadline to obtain the licence was originally set at Sept 25, 2017. This was subsequently extended to Dec 31, 2017 as a matter of good faith.
“Following the failure to obtain the manufacturing licence within that timeframe, this entitles either party to terminate the EJVC,” said DRB-Hicom.
Following the termination, the parties involved will consider and agree on the next course of action under the EJVC and in accordance with the laws of China.
The purpose of the EJVC was to form a JV company to produce and sell Lotus branded passenger cars and parts, and to provide after-sales services in China.
Following the agreement, GLAC was formed on Sept 25, 2015 as a limited liability company in China.
The current paid-up capital of GLAC is 180 million yuan and its shareholders are Proton (40%), LGIL (10%) and Goldstar (50%).
The economic interests of Proton and LGIL in GLAC were transferred to DRB-Hicom on Sept 29, 2017 following the terms of the share subscription agreement entered into between DRB-Hicom and Zhejiang Geely Holding Group Co Ltd.
“The termination of the EJVC will not have any effect on DRB-Hicom’s issued and paid-up capital and substantial shareholders’ shareholdings.
“There will also be no material effect on the DRB-Hicom’s group earnings, gearing and net assets for the financial year ending March 31, 2018,” it said.
This is Proton’s second attempt at a JV with Goldstar. There had been a tie-up between the two companies in 2002. Similar to this round, the split happened because Goldstar failed to obtain the manufacturing licence to produce vehicles from the Chinese authorities.
When this deal was first inked in 2015, there were high hopes that the JV would lead to the production and selling of Lotus-branded cars in China, with the production facility to be based in the Fujian province.
Based on the plans back then, DRB-Hicom would have needed to fork out RM270mil for its portion in the JV, where the initial investment was estimated at 2.7 billion yuan (RM1.6bil) with an injected cash capital of 900 million yuan (RM540mil).
During this period, the total required investment is expected to grow from 2.7 billion yuan to 5.7 billion yuan, possibly including bank financing.
In the second phase of the 30-year business plan, the total investment sum would increase from 5.7 billion yuan to 10 billion yuan.