BAIC Group Plans To Acquire 5 Percent Stake In Daimler To Secure Its Investments

BAIC Group
BAIC Group car seen at the IEEV New Energy Vehicles Exhibition in Beijing (Photo: Reuters)

Chinese holding company BAIC Group, which owns automotive manufacturers such as Foton Motors, BAW, and Changhe, is reportedly seeking to purchase a 5 percent stake in Daimler AG as a way to secure its investment with the German automaker. The state-owned enterprise currently has a partnership with Daimler resulting in a Chinese Mercedes-Benz manufacturing subsidiary called Beijing Benz Automotive.

According to reports citing sources familiar with the matter, BAIC has apparently informed Daimler of its plans to buy a relatively large stake of its company.

Relevant Chinese agencies have reportedly also been informed of BAIC's plans and have been asked for support for the planned purchase. There are also reports that have indicated that BAIC has already started purchasing Daimler shares on the open market.

Market analysts have revealed that an unknown buyer has been seen buying large amounts of Daimler shares, underpinning its prices. The buyer is believed to be building a stake in the company. Both BAIC and Daimler have not yet released statements in response to the reports.

It is not yet clear where exactly BAIC will be getting the substantial amount of capital to amass a 5 percent stake in Daimler AG. Based on current stock prices and Daimler's $64.69 billion market value, a 5 percent stake in the company will cost around $3.37 billion.  

In Germany, buyers can only acquire up to a 3 percent stake in a company without any regulatory disclosures required. Regulatory filings in the country still currently do not show BAIC as a shareholder of the Daimler.

The German automaker also has not yet released any new stock, which means that companies wishing to get a major stake will have to purchase the stocks on the open market.

BAIC Group had previously been hinting at its intention of buying a significant stake in Daimler as far back as 2015. This was further indicated following a major purchase by its rival Zhejiang Geely Holding Group, which purchased a 9.69 percent stake in Daimler in 2018. The move was orchestrated by the firm's chairman Li Shufu, who kept the plan under wraps until its execution.

Li had used shell companies in Hong Kong, large bank financing and share options, and derivatives to come up with the cash to purchase the significant stake. Geely Holding Group's purchase made it the single largest shareholder of Daimler AG.

Through the partnership, Geely and Daimler are planning to build next-generation vehicles for future smart cities. Daimler has assured BAIC that their partnership will not be affected by any of its new industrial alliances, but a 5 percent stake in the company will likely put BAIC executives' minds at ease moving forward. 

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