China’s BAIC willing to increase Daimler holding after 5% stake acquistion

Daimler’s main Chinese joint venture partner BAIC Group has signaled its intention to increase its stake in the German luxury car manufacturer, sources briefed on the matter said, after it built up a 5 percent Daimler holding in July.

Officials at BAIC’s Hong Kong-listed company, BAIC Motor Corp, said at investor conferences in mid-October that “both sides are willing to increase stakes in the other”, responding to questions about the future relationship between BAIC Group and Daimler, the sources said.

Daimler said in a regulatory filing on Friday that HSBC held 5.23 percent of Daimler’s voting rights directly as well as through instruments such as equity swaps as of November 15. BAIC used HSBC to help it build its initial 5 percent stake.

The sources declined to be identified as they are not allowed to speak to the media.

A Daimler spokesperson on Monday said, that the company had received notification from HSBC that the voting stake of 5 percent has been exceeded.

While the spokesman would not say whether BAIC played a role in the transaction, he added that Daimler welcomed long-term shareholders such as BAIC that support the carmaker’s strategies.

“Daimler AG appreciates BAIC as a long-standing partner and long-term investor,” the spokesperson said in a written statement.

“Such shareholders help us to further safeguard and strengthen the capitalization of our company.”

BAIC was not immediately available for comment.

Geely, Daimler’s biggest shareholder with a 9.7 percent stake, said，“We are a longterm investor in Daimler. We do not react spontaneously to any volatility and we support Daimler’s management and strategy.”

BAIC has been Daimler’s main partner in China for years and operates MercedesBenz factories in Beijing through Beijing Benz Automotive.

Two months before its July stake deal was announced, sources told Reuters that BAIC wanted to invest in Daimler to secure its investment in Beijing Benz Automotive.

In March, sources told Reuters Daimler had asked Goldman Sachs to help it explore increasing its stake in BAIC’s Hong Kong-listed company.

The partners also planned to revamp manufacturing facilities to make Mercedes Benzbrand trucks via their commercial vehicle joint venture Foton Daimler Automotive, Reuters reported in August, citing a document and sources familiar with the matter.

The companies also said Daimler and BAIC’s newenergy vehicle unit BluePark have jointly developed a battery research lab in Beijing.

State-owned BAIC built its stake after Li Shufu, chairman of rival private automaker Zhejiang Geely Holding Group, built a 9.69 percent stake in Stuttgart-based Daimler.

By using Hong Kong shell companies, derivatives, bank financing and structured share options, Li kept the plan under wraps until he was able, at a stroke, to become Daimler’s single largest shareholder.

Since the investment, Geely and Daimler have said they plan to build the next generation of smart electric cars in China through a joint venture.