Geely chairman builds $9 billion stake in Germany’s Daimler
The chairman of Chinese carmaker Geely has built up an almost 10 percent stake in Mercedes-Benz owner Daimler, making a $9 billion bet that he can push through an alliance to access the German company´s technology.
The purchase by Li Shufu, Geely´s founder and main owner, means China´s largest privately-owned automaker is now Daimler´s biggest shareholder.
Geely said there were no plans “for the time being” to raise the stake further.
Instead, it will seek to forge an alliance with Daimler, which is developing electric and self-driving vehicles, to respond to the challenge from new competitors such as Tesla, Google and Uber, which are all working on their own new technology cars.
“No current car industry player is likely to win this battle against the invaders from outside without friends. To achieve and assert technological leadership, one has to adapt a new way of thinking in terms of sharing and combining strength. My investment in Daimler reflects this vision,” Li said.
Only two or three manufactures will likely survive in the auto industry going forward, a source familiar with Li´s thinking told Reuters, prompting Geely to seek access to carmakers with a technological edge.
Its move on Daimler poses a challenge to the German carmaker, since Mercedes-Benz already has an industrial alliance to develop cars and trucks with Renault-Nissan, which owns a 3.1 percent stake in Daimler, and has announced plans to build electric cars with existing Chinese joint-venture partner BAIC Motor Corporation.
Bernstein Research analyst Max Warburton said: “It´s not clear what Geely wants and how it´s going to work, but we view this move as part of a broader Chinese move to gain involvement in the European automotive industry.”
“China wants a payback after spending a decade gifting the European auto industry super-normal growth and profits. Now it wants more direct access to technology, brands and profits,” he wrote in a note, shortly after the stake was disclosed in a regulatory filing.
German state secretary at the economy ministry, Matthias Machnig, said EU trade ministers would discuss how better to protect strategically important European companies from unwanted investors.
“It is important that Europe keeps a close eye on which key European technologies foreign strategic investors are setting their sights on,” he said.
Machnig did not comment specifically on Daimler. Daimler is the only one of Germany´s three carmakers not to be controlled by a family.
Volkswagen is majority-owned by the Porsche-Piech clan, while BMW is 47 percent owned by Susanne Klatten, Germany´s richest woman, and her brother Stefan Quandt.
Zhejiang Geely Holding has been on an expansion drive. It owns Volvo Cars, LEVC, the maker of London´s black cabs, and last year took a majority stake in sports car maker Lotus, a 49.9 percent stake in Malaysian automaker Proton, a $3.3 billion stake in Volvo Trucks and control of flying car start-up Terrafugia.
Analyst Arndt Ellinghorst of Evercore ISI said: “We only believe that Geely would consider an investment of this magnitude if there was a more significant industrial opportunity from cooperation between Geely/Volvo and Mercedes.”
The stake purchase follows an initial approach last November, when Li sought to buy a Daimler stake as a way to access Mercedes-Benz technology for electric cars and trucks, including battery technology, to help Geely comply with a Chinese crackdown on pollution.
Geely sees potential in Daimler because it is developing high-speed internet connections for autonomous cars at a time when Li believes satellite-based internet connections could become more important for the auto industry.
In November, Geely asked Daimler to issue new shares so it could buy a stake, but the German company turned down the offer saying it did not want to dilute existing shareholders.
Li changed tactics, and quietly amassed a stake of 9.69 percent worth $9 billion at Daimler´s current share price.
Normally, investors are required to inform the German financial regulator and the market when their share of a public company reaches 3 and then 5 percent.
German watchdog Bafin did not immediately respond to requests for comment on whether it was looking into Geely´s acquisition of the Daimler stake.
The German economy ministry said there are legal regulations that have to be adhered to in takeovers and it is the duty of investors to follow these and to check them.
Chinese investors in German technology companies have tended to take a consensual approach, buying incremental stakes in companies such as robotics firms Kuka and Kion, typically after long consultation with management and other stakeholders.