Zotye Auto raising $106 mln by selling 30% stake

Shanghai, May 6 (Gasgoo.com) Chinese SUV maker Zotye Auto is raising about 720 million yuan ($106 million) by selling up to 30% stake to a private equity fund-led consortium, aiming for a Shanghai initial public offering (IPO), sources said Tuesday.

Zotye, based in China's eastern Zhejiang province, has planned to sell shares to a group of investors led by SND Ventures Group, a Chinese private equity firm backed by the Suzhou government in neighboring Jiangsu province. The deal is expected to be completed later this month, according to a Zotye executive.

Some foreign funds have approached Zotye but it has declined. China is encouraging local governments to develop yuan-denominated investment funds to support key local industries and companies. Local funds often win approval for deals more easily than foreign investors.

SND Ventures was established in 2008 with strong support from the Suzhou government, and it aimed to manage 5 billion yuan in the next two years.

Zotye's leadership intends to make the government-controlled carmaker a pure Chinese auto brand. The company plans to make and sell 500,000 vehicles by 2012, aiming to double that capacity by 2017.