Chery sells 20% stake to local investors for $293M

Shanghai, June 3 (Gasgoo.com) China's Chery Auto has raised about two billion yuan ($293 million) by selling a 20% stake in the company to local private-equity investors including Bohai Industrial Investment Fund Management Co. and CDH Investments, reported The Wall Street Journal today, citing sources familiar with the deal.

Chery spokesman Jin Yibo has confirmed the scale of the fund-raising and said the company plans to use the money to continue its own development. He added that the funds weren't raised to pursue overseas acquisitions. The deal was finalized over the past few months.

The fund-raising will help bolster the Anhui-based carmaker's balance sheet against shortfalls in sales. One of China's largest independent carmakers, Chery failed to meet its sales target of 480,000 vehicles in 2008, selling just 356,000. This year, Chery has lowered the bar for itself, aiming to sell 419,000 vehicles in 2009.

Chery has been considering plans for a domestic initial public offering (IPO) of stock in Shanghai, and the investment sets a valuation standard for an offering when Shanghai's exchange reopens to new IPOs. Mr. Jin said Chery has submitted the IPO application to the China Securities Regulatory Commission.

The investors in the deal are all local funds. Bohai Industrial Investment Fund Management, created as a local private-equity firm, is 53%-owned by Bank of China Ltd. CDH Investments, which also operates offshore U.S. dollar-denominated funds, is using its five-billion-yuan fund raised from local investors.

Chery Auto also received a financial boost last year when policy lender Export-Import Bank of China agreed to grant 10 billion yuan of loans to the carmaker.