By Bloomberg News
Sept. 22 (Bloomberg) -- Goldman Sachs Group Inc.’s possible investment in Geely Automobile Holdings Ltd. may do for China’s biggest private automaker what Warren Buffett did for BYD Co.
BYD, the Chinese maker of the world’s first mass-produced plug-in hybrid car, has jumped more than fivefold in Hong Kong trading since agreeing to sell shares to Buffett’s Berkshire Hathaway Inc. last year. Goldman Sachs Capital Partners VI, a private-equity fund run by the New York-based bank, plans to buy a Geely Auto stake for about $250 million, a person familiar with the matter said, declining to be identified.
“A big name investor certainly helps boost stock prices and brand recognition,” said Li Lixi, a Northeast Securities Co. analyst in Shanghai. “Goldman’s investment in Geely may repeat the impact that Buffett had on BYD.”
Chinese automakers have lured investors as economic growth may enable the country to surpass the U.S. as the world’s biggest vehicle market this year. Geely wants to raise funds as it seeks new technology and overseas sales, including a possible bid by its parent for Volvo Car Corp.
The Wall Street Journal reported the Goldman Sachs investment on Sept. 19, citing an unidentified person familiar with the plan. Geely shares have more than doubled this year in Hong Kong trading.
Dai Yang, vice president for international business development at Geely Auto, wasn’t immediately available. Geely halted its shares pending a bond sale announcement on Sept. 16.
Volvo Bid
Geely Holding Group Co. is looking at an offer for Ford Motor Co.’s Volvo unit, possibly in partnership with a Chinese state investment company, Geely Auto Chief Executive Officer Gui Shengyue said Sept. 8. The Goldman deal will make capital available to aid the bid, the Wall Street Journal said.
A Volvo deal may help Geely meet founder Li Shufu’s target of getting 66 percent of sales from overseas by 2015 compared with 5 percent in the first half.
Dearborn, Michigan-based Ford, the only U.S. automaker to decline a federal bailout, put Volvo up for sale in December as it abandoned a luxury-auto strategy. Ford is seeking about $2 billion for Gothenburg, Sweden-based Volvo, less than a third of what it paid a decade ago, two people with knowledge of the sale said in May.
Goldman Sachs Capital Partners VI will buy convertible bonds and warrants in Geely, the person said. It comes after two proposed investments in China by Goldman were blocked by Chinese regulators in 2007.
Buffett, BYD
BYD sold 225 million new shares to Berkshire’s MidAmerican Energy Holdings Co. for HK$8.00 each. Chief Executive Officer Wang Chuanfu said at the time that the investment would help boost the automaker’s profile overseas.
BYD almost doubled first-half profit after China’s auto stimulus measures helped it double vehicle sales. MidAmerican may increase its stake in the company, Chuanfu said after the results announcement in August.
The carmaker gained 0.9 percent to HK$68.10 at the 12:30 p.m. trading break in Hong Kong. Berkshire has made a $1.7 billion paper profit from the deal. Geely Auto closed at HK$1.79 on Sept. 15.
Geely Auto more than doubled first-half profit to 595.9 million yuan ($87 million) after raising its stakes in carmaking ventures and adding larger, pricier models. The company also benefited from the government stimulus measures.
Manganese Bronze
The automaker earlier this year unveiled the EC718 sedan, its first model specifically designed for European markets. The car, priced from 80,000 yuan ($11,700) to 120,000 yuan domestically, still needs to win certification to be sold in Europe.
Geely has also bought a stake in Manganese Bronze Holdings Plc and set up a Shanghai venture with the London-cab maker that is shipping cars to countries including Saudi Arabia, Turkey and Spain. The company also purchased the key assets of Australian gearbox maker Drivetrain Systems International earlier this year, gaining technology for making automatic transmissions.
Chinese automakers are targeting exports as rising competition from Toyota, General Motors Co. and Volkswagen AG erodes the benefits of surging demand at home. Industrywide profit fell 9.9 percent in the first five months even as vehicle sales jumped 14 percent.
--Tian Ying with assistance from Cathy Chan in Hong Kong. Editors: Neil Denslow, Anand Krishnamoorthy
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