Guangzhou Auto to buy 30% of Changfeng Motor

Shanghai, May 19 (Gasgoo.com) Guangzhou Auto has reached an initial agreement with Hunan-based Changfeng Motor to buy possibly up to 30% stake of the SUV-maker, sina.com said today. The restructuring deal will be announced later this week.

The deal, which is expected to be officially signed on May 23 at the earliest, will make Guangzhou Auto the largest shareholder of Changfeng Motor, which has a market capitalization of 5.78 billion yuan ($846.7 million). Guangzhou Auto operates car manufacturing ventures with Toyota Motor and Honda Motor.

Sources said that final terms of the deal had yet to be hammered out, but Guangzhou Auto's stake in Changfeng was unlikely to exceed 30%. Changfeng is currently 50.98% owned by its parent group and 14.59% owned by Mitsubishi Motors, which will remain a major shareholder after the restructuring deal.

Changfeng Motor builds Mitsubishi Pajero SUVs as well as its own-brand Liebao SUVs in Changsha city, capital of south China’s Hunan province. As part of the restructuring, Changfeng will have its product strategy integrated into the development plans of the Guangzhou Auto, who aims to become China's fourth largest automaker.

Guangzhou Auto's current profit-making models are sedans and MPVs, mostly made by its joint ventures with Toyota and Honda. In the SUV segment, Changfeng Motor has the capabilities and expertise to fill this gap for Guangzhou Auto. In return, Changfeng hopes to develop sedan models together with Guangzhou Auto.

Changfeng Motor's shares were suspended from trade today pending announcement of a major restructuring deal.