FAW Group plans a $7.2 billion acquisition of BMW partner Brilliance

BMW

Two reliable sources have revealed that FAW Group is looking at acquiring Brilliance China Automotive Holdings Ltd, BMW’s main Chinese partner, in deals that may cost it some $7.2 billion and then take it private.

The news of the planned acquisition made Brilliance shares soar as much as 25.6%.

The potential acquisition by state-owned FAW, China’s No. 2 automaker, comes at a time when Brilliance’s top shareholder Huachen Automotive Group is on the brink of bankruptcy, having defaulted on 6.5 billion yuan ($1 billion) in debt obligations late last year.

According to the sources, FAW intends to first purchase 30.43% of Brilliance owned by Huachen and 11.89% owned by the state-controlled Liaoning Provincial Transportation Investment Group, said the sources.

It would then make a mandatory bid for the rest of Brilliance’s shares. It is considering offering about HK$11 per share for the two-stage deal, representing a 70% premium to its average share price over the past month of HK$6.48.

To conduct a deal, FAW is looking at setting up an offshore investment vehicle and is seeking other investors, said the sources, who declined to be identified as the discussions were confidential.

FAW and BMW declined to comment. Brilliance, Liaoning Provincial Transportation Investment Group did not immediately respond to requests for comment.

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