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China's Geely Buying $9 Billion Stake in Daimler

China's Geely Buying $9 Billion Stake in Daimler
(Mohamed Ahmed Soliman | Dreamstime)

Friday, 23 February 2018 12:34 PM

The chairman of Chinese carmaker Geely has built a 9.69 percent stake in Mercedes-Benz owner Daimler, filings showed on Friday, demonstrating a shift in strategy by Chinese investors seeking access to new technology.

Two sources familiar with the thinking of Li Shufu said his move to accumulate the stake, which has a market value of $9 billion, was motivated by the “dramatic transformation” under way in the automotive industry.

His strategic goal was an industrial alliance with Daimler, which is developing electric and self-driving vehicles, to respond to the challenge from U.S. players Tesla, Google and Uber, who are all working on their own driverless cars.

“This is what Chairman Li has envisioned. He thinks maybe one or two or three manufacturers that exist today will survive in this new competition,” one of the sources said, requesting anonymity because of the sensitivity of the matter.

“He thinks existing manufacturers should unite and invest in the future and become one of the two or three companies that will survive.”

Mercedes-Benz already has an industrial alliance with Renault-Nissan, which owns a 3.1 percent stake in Daimler, and has announced plans to build electric cars in China with existing partner BAIC Motor Corp.


The stake purchase followed an initial approach last November, when Geely sought to buy a Daimler stake as a way to access Mercedes-Benz electric vehicle and battery technology to help it to comply with a Chinese crackdown on pollution.

Sources at the time told Reuters that Geely had asked Daimler to issue new shares so that it could buy a stake.

Daimler declined, leading Li to change tactics and quietly accumulate shares. The 9.69 percent stake is the biggest single holding in the maker of luxury cars, trucks and vans, according to Thomson Reuters data.

“Daimler is pleased to have won a new long-term investor who is convinced of the innovation power, strategy and the potential of Daimler going forward,” the German company said on Friday.

“Daimler knows and respects Li Shufu as a Chinese entrepreneur of particular competence and forward thinking.”

Chinese investors in German technology companies have previously opted to take a consensual approach, buying incremental stakes in companies such as Kuka and Kion, typically after long consultation with management and other stakeholders.

The source said that Daimler and Geely had not held concrete talks about how to structure a potential joint venture, adding: “You know we have to become a stakeholder in order to engage.”

The size of the holding accumulated by Li raises questions about how he was able to buy the stake without first alerting the German markets regulator that he had surpassed the 3 percent and 5 percent ownership thresholds.

Zhejiang Geely owns Volvo Cars, as well as the maker of London’s black cabs, and last year acquired a 49.9 percent stake in Malaysian automaker Proton and a stake in Volvo Trucks.

© 2018 Thomson/Reuters. All rights reserved.

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China's Zhejiang Geely Holding Group Co. is buying a stake worth about 7.5 billion euros ($9.22 billion) in Daimler AG to become the largest investor in the German automaker, Bloomberg reported.
china, geely, stake, daimler
Friday, 23 February 2018 12:34 PM
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