Now about those Benz-BAIC rumors: While Beijing is going gaga, Reuters has been suspiciously quiet about an upcoming deal between Daimler and its Chinese partner BAIC. Reuters, which has good ears and feet on the ground in China, had reported two weeks ago that something might be happening. Today, Reuters breaks its silence and says:
“Daimler will sign a deal in Germany on Friday to take a 10-20 percent stake in its Chinese partner, BAIC Group, China’s National Business Daily newspaper said on Thursday.
BAIC, which is planning to take its subsidiary, BAIC Motor, public in 2013 or 2014, will also increase its holding in its 50-50 venture with Daimler’s Mercedes-Benz to 51 percent, the newspaper said, citing unnamed people.”
As we had learned from to Saga of GM’s Golden Share, a 51 percent majority allows a Chinese company to recognize the full profit of the entity. This should increase BAIC’s valuation immensely when BAIC goes public. It also promises to become a very good deal for Daimler:
Instead of selling the golden share for a lousy $80 million as GM did, Daimler gets a nice package of BAIC shares long before the offering. When BAIC goes public, Daimler’s holdings will multiply by virtue of the golden share.
Buying into a Chinese carmaker is an investment into growth and emerging markets. BAIC makes most of its volume building Mercedes and Hyundai cars in joint ventures. By comparison, BAIC’s ventures into own brands remain insignificant. BAIC can use a closer and more trusting relationship with a high-powered carmaker.