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Dongfeng, Hafei Auto in talks for partnership
Shanghai. February 26 (Gasgoo.com) – After 40-days of stock trading suspension, the Shanghai-listed Harbin Dongan Auto Engine Co. announced yesterday that its parent company AviChina Industry & Technology Company is in talks with China's third largest automaker Dongfeng Motor for a possible tie-up.
The announcement said that AviChina and Dongfeng will form a joint venture and AviChina will finance the venture with restricted circulating shares of Dongan, and parts of assects from its subsidiary minivan manufacturer Harbin Hafei Automobile Industry Group.
The restricted circulating shares of Dongan to be transferred to the prospective joint venture account for 58.77 percent of Dongan's total capital stock; Hafei Auto's production and sales network assets in Harbin will also be transferred to prospective joint venture. Dongan said its stocks will resume trading after a final agreement is reached.
State-owned AviChina, which holds 59.51 percent of Dongan Auto Engine, wants to spin off its none-core assets to focus on aircraft manufacturing, while Dongfeng Motor, who is specialized in producing passenger vehicles and medium-to-heavy duty trucks, faces tough competition from SAIC and Changan Automobile (Group) in China.
Chinese newspaper 21st Century Business reported last December that Dongfeng may plan to offer 2 billion yuan ($270.54 million) to buy at least 50 percent stakes of Hafei Group.
If approved by Chinese authorities, the deal would mark another consolidation in China's fragmented auto industry. In December, top domestic carmaker SAIC Motor Corp completed acquisition of a smaller rival Nanjing Automobile Group.
The announcement said that AviChina and Dongfeng will form a joint venture and AviChina will finance the venture with restricted circulating shares of Dongan, and parts of assects from its subsidiary minivan manufacturer Harbin Hafei Automobile Industry Group.
The restricted circulating shares of Dongan to be transferred to the prospective joint venture account for 58.77 percent of Dongan's total capital stock; Hafei Auto's production and sales network assets in Harbin will also be transferred to prospective joint venture. Dongan said its stocks will resume trading after a final agreement is reached.
State-owned AviChina, which holds 59.51 percent of Dongan Auto Engine, wants to spin off its none-core assets to focus on aircraft manufacturing, while Dongfeng Motor, who is specialized in producing passenger vehicles and medium-to-heavy duty trucks, faces tough competition from SAIC and Changan Automobile (Group) in China.
Chinese newspaper 21st Century Business reported last December that Dongfeng may plan to offer 2 billion yuan ($270.54 million) to buy at least 50 percent stakes of Hafei Group.
If approved by Chinese authorities, the deal would mark another consolidation in China's fragmented auto industry. In December, top domestic carmaker SAIC Motor Corp completed acquisition of a smaller rival Nanjing Automobile Group.
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