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China's Geely Is Said to Be Buying $9 Billion Stake in Daimler

Zhejiang Geely Holding will acquire a stake worth almost $9.2 billion in Daimler.

China's Geely Is Said to Be Buying $9 Billion Stake in Daimler
A Daimler AG Mercedes-Benz Concept EQA electric vehicle sits on display in Detroit, Michigan, U.S. (Photographer: Daniel Acker/Bloomberg)

(Bloomberg) -- Chinese manufacturer Zhejiang Geely Holding Group Co. is acquiring a stake worth almost 7.5 billion euros ($9.2 billion) in Daimler AG to become the largest investor in the German automaker, according to people with knowledge of the matter.

Geely has been building up a stake of just under 10 percent through purchases of Daimler’s shares in the stock market in recent weeks, the people said, asking not to be named as the details aren’t public. The Hangzhou-based automaker could announce the transaction in coming days, they said.

A spokesman for Daimler declined to comment. Representatives at Geely couldn’t immediately be reached outside business hours in Asia.

Buying a stake in the parent of Mercedes would further Geely’s foray into the European premium automotive market. The company already owns Volvo Cars AB, whose refreshed line-up of vehicles have made it a popular alternative to the German luxury stalwarts. Daimler, too, has been on an upward path, reclaiming the No. 1 crown in luxury cars from BMW AG, and broadening its offerings to include more SUVs and newer versions of the S-Class sedan. 

Li Shufu, the Chinese billionaire who controls Geely, in a video released at a German conference this month declined to comment on speculation that he’s expanding in Europe with an investment in Daimler. The German company has previously said it would welcome any long-term investor buying shares, while declining to comment specifically on Geely.

Expansion Ambitions

In December, Li became the biggest shareholder in Sweden’s Volvo AB, the world’s second-largest truckmaker, following a $3.9 billion deal with activist investor Cevian Capital AB. In 2010, he acquired Volvo Cars from Ford Motor Co., and last year won control of British sports-car maker Lotus Cars Ltd.

The Chinese firm, which controls Hong Kong-listed Geely Automobile Holdings Ltd., has ambitious expansion plans for both its home market and overseas as it takes on global car majors. Geely plans to start selling a compact five-seat SUV, currently marketed under the Lynk & Co brand, outside China from mid-2019. It’s likely to look first at Europe, with Volvo Cars signaling that it would offer the use of a factory in Belgium to the tycoon.

Daimler expects profit growth to come to a sudden halt this year, highlighting how the car industry has shifted into an intense investment mode to rebuild around a future of electric vehicles and autonomous driving. The company’s muted 2018 forecast, delivered this month, showed the strains of the spending demands at its Mercedes unit. Last year, the firm sold more cars than ever before, and posted record revenue and profit.

Eventual Split?

Daimler firmed up plans toward the end of 2017 to break up its rigid conglomerate structure, instead creating a holding company with three separate units: Mercedes-Benz Cars & Vans, Daimler Trucks & Buses and the financial-services division. While Daimler said the move isn’t a prelude to a spin-off of any of the businesses, some investors have called on the company to consider an eventual split on the back of the clearer delineation between the units.

Kuwait’s sovereign wealth fund, which has been an investor in Daimler for decades, was the largest stakeholder in the automaker as of the end of December with a 6.8 percent holding. 

Daimler isn’t the only German automaker to have a big anchor investor: Volkswagen AG is essentially controlled by the Porsche-Piech billionaire clan, while also counting the government of Qatar as a major stakeholder. BMW is controlled by the Quandt-Klatten family, whose billionaire siblings boosted their personal holdings in the second-largest luxury carmaker this year after equally dividing their late mother’s stake.

--With assistance from Dinesh Nair and Elisabeth Behrmann

To contact Bloomberg News staff for this story: Ruth David in London at rdavid9@bloomberg.net, Vinicy Chan in Hong Kong at vchan91@bloomberg.net, Eyk Henning in Frankfurt at ehenning1@bloomberg.net.

To contact the editors responsible for this story: Ben Scent at bscent@bloomberg.net, Chitra Somayaji, Benedikt Kammel

©2018 Bloomberg L.P.

With assistance from Ruth David, Vinicy Chan, Eyk Henning