After last week’s announcement of a $9 billion Daimler stock buy-up by China’s Geely Group, an old story is once again rearing its head. Remember last year’s buzz surrounding a possible takeover of Fiat Chrysler Automobiles? The rumors CEO Sergio Marchionne subsequently refuted? Yes, that story.
A new report claims Geely did indeed give FCA the once-over, even engaging in preliminary talks. Obviously, this first date went nowhere, as Geely now owns nearly 10 percent of German auto giant Daimler, not the maker of Jeeps and Rams.
Sources tell Bloomberg that in the middle of last year, Li Shufu, founder and chairman of Zhejiang Geely Holding Group Co., approached FCA. Shufu, always on the hunt for non-Chinese holdings (Geely owns Volvo Cars and Lotus, to name a couple), engaged in informal talks with the automaker, but adding FCAÂ â€” or a large chunk of its stockÂ â€” to the billionaire’s portfolio just wasn’t in the cards.
No offer was made, the sources claim. Apparently, Shufu and FCA disagreed over the automaker’s future valuation once the current five-year plan wraps up. This jibes with statements made by Geely following last year’s Reuters report.
As for that fresh 9.7 percent stake in Daimler, Geely didn’t go about the stock buy in the usual way. Bloomberg reports the automaker snapped up the shares via a derivatives transaction. The collar trade, allegedly led by Bank of America and Morgan Stanley, would be the largest single-stock deal of its kind. Such a setup would limit Geely’s financial losses if Daimler’s stock were to suddenly tank. It also puts a ceiling on how much cash Geely could reap if Daimler’s shares blow up.
While Daimler appears to welcome the stock purchase, claiming it’s encouraged by Shufu’s confidence in the automaker’s future, Germany seems a little wary of the deal. On Monday, various German newspapers reported (via Reuters) that a Parliamentary committee will question officials to ensure the Daimler-Geely deal is on the up and up.
Last year, Germany tightened laws aimed preventing the foreign takeover of domestic businesses. Geely’s 9.7 percent stake falls well below the 25 percent marker, which is point where the German government can step in to kibosh a deal. Speaking about Geely, German economy minister Brigitte Zypries steered clear of specifics, saying only that her country’s industry must not be “exploited” by other countries.
[Image: Fiat Chrysler Automobiles]