By on January 31, 2013

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.

 

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4 Comments on “Benz And BAIC Expected To Lift The Veil Tomorrow...”


  • avatar

    Bertel, is Mercedes more protected in this than GM with SAIC? Or is Mercedes trading long term future for short term gain? Is this much different from SAIC-GM partenering it out in the third world?

    • 0 avatar

      You bet it is.

      If the deal goes down as described, Daimler will essentially sell the golden share to itself, or rather to a company where it owns a nice package, and where it sits on the board, as opposed to just sitting on the board of the JV. The golden share will magically lift the underlying profit by the full profit of the BAIC/Daimler JV – stock pops.

      Also, AFAIK, Daimler would be the first carmaker to actually have shares in a Chinese carmaker directly. GM doesn’t own shares of SAIC. China owns a few shares of GM.

  • avatar
    Lorenzo

    I wonder about the other part of the rumor, that BAIC would get to use the E-class platform for a domestically branded luxury car? That would add to the success of the newly listed company and add value to Daimler’s share of it. Could a BAIC branded upscale model based on the CLA be far behind?

    It does look like GM screwed up, but there were excruciating, er, exterminating, um, extenuating circumstances, with Henderson giving up the golden 1%, sharing the stake in the India market, and the aborted sale of Opel, for cash. His “sell off the far-flung parts to keep the home core afloat” strategy ended when Whitacre took over. No telling what gears will be shifted when Akerson leaves.


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