SAIC to buy GM

China's Largest Automaker to Invest in GM

SAIC Motor Corp., China's largest automaker and a joint-venture partner with General Motors, is preparing to buy about $500 million worth of stock in the Detroit automaker, according to a newspaper website.

The Wall Street Journal reported Friday that SAIC is one of several foreign investors who could buy GM shares worth more than $1 billion as part of an initial public stock offering scheduled for Nov. 18. GM and SAIC wouldn't comment on the report when contacted by The Associated Press.

The U.S. government, which now owns 61 percent of GM but is looking to reduce its stake to around 40 percent in the IPO, has said the company would seek foreign investment as well as investment from the U.S.

Foreign investment in U.S. automakers and other companies is common.

Investment from sovereign wealth funds is considered good for a company because the funds tend to hold stakes for a long time, providing stability, the newspaper said. But it's also a touchy issue for the Obama administration, especially if some individual investors in the U.S. are unable to buy shares in the IPO.

U.S. taxpayers gave GM $50 billion to get it through bankruptcy protection last year. The automaker has repaid or plans to repay $9.5 billion, and the government hopes to get the remaining $40 billion back through the IPO and several follow-up sales.

A final decision by SAIC could come in the next few days, according to the newspaper, which cited people familiar with the situation that it did not identify.

GM and its investment advisers plan to release the stock's final price on Wednesday. The actual sale will take place on Thursday. The U.S. government and GM's other owners are selling 365 million shares of common stock. The IPO target price is between $26 and $29 per share. In addition, GM is selling 60 million preferred shares for about $50 each. The preferred shares will pay a dividend of 5.5 to 6 percent per year, a person briefed on the matter told The Associated Press Friday.

SAIC Motor Corporation Limited Near General Motors Company IPO Stake Buy-Reuters
Thursday, 11 Nov 2010 01:19am EST
Reuters reported that General Motors Company is in the final stage of talks to sell equity to SAIC Motor Corporation Limited as part of its initial public offering. The two government-funded automakers are currently finalizing how much of a stake SAIC would buy in General Motors Company after discussions involving technology sharing and SAIC's ambitions to move beyond the China market.

UPDATE: SAIC Motor: Unit Bought 15.152 Mln GM Shares For $500 Mln

BEIJING (Dow Jones)--SAIC Motor Corp. (600104.SH) said Thursday its wholly owned unit SAIC Motor HK Investment Ltd. bought 15,151,515 ordinary shares in General Motors Co.'s initial public offering for $500 million, accounting for about 0.97% of GM's total equity.

The unit paid $33 per share, and it will raise all the capital from the Hong Kong financial market, SAIC said.

GM president of international operations Tim Lee said in a statement the company is "happy with SAIC's decision to participate in GM's public offering."

The move comes as GM and its long-time Chinese partner SAIC have deepened ties in recent weeks. GM said earlier this month it plans to increase its stake in its Wuling microvan joint venture with SAIC to 44% from the current 34%.

The two companies also signed an agreement earlier this month to deepen their technical cooperation and further integrate SAIC into GM's global product-development system. The agreement is intended to allow the two companies to share technology and experience more widely to support the joint development of electric cars and components.

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Sources close to the deal said the nominal SAIC stake was largely “symbolic”, and is not expected to provoke any public backlash against Chinese ownership in such an iconic US company. Political sensitivities are likely to have discouraged SAIC from taking a larger stake, industry analysts said.

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SAIC is already a de facto owner of GM,” says Mike Dunne, of Dunne & Co, an Asian car consultancy. “It owns a majority (51 per cent) share of Shanghai GM, which has been contributing about 25 per cent of GM’s global profits this year,” he said.

SAIC takes low stake to test the bottom line investment in the U.S.A

November 18, caught in bankruptcy protection and delisted 17 months of General Motors in New York and Toronto Stock Exchange initial public offering at the same time. The IPO, GM issued a total of 478 million ordinary shares and 8,700 shares of preferred stock authorized convertible subordinated to raise about $20.1 billion. In addition, if the underwriters fully exercise the over-subscription rights, financing amount will reach 23.1 billion U.S. dollars.

Prior to this, SAIC wide concern for the market will spend $ 500,000,000 for 1% of common equity subscribed news had been confirmed. Shanghai Automotive (600104) also announced on the same day, the company through its wholly owned subsidiary of Shanghai Automotive Hong Kong Investment Limited (SAIC Hong Kong) subscribed to 499,999,995 U.S. dollars of about a 0.97% stake in GM.

Behind the 0.97% stake, in fact, the history of the automobile, student to teacher "feed" the story, although the "student" in addition to solid family property is no excellent skills, "teacher" also are in the recovery of recovering from illness. But whatever the merits of the investment gains and losses, "students" always take "predecessors" the first step.

SAIC capital operation in Hong Kong as a bridgehead

In June 2009, SAIC set up foreign operations for the investment and financing platform, SAIC set up in Hong Kong. The company said, Hong Kong's capital markets are international capital markets, international capital flows and convenient financing created a better environment conducive to the financing to build a good platform.

Some analysts have pointed out that time, the Shanghai Hong Kong is a buried hint, which may become SAIC's capital operation platform. Because Hong Kong and internationally accepted financial, to legal norms are closer.

Conducted in December 2009 transfer of shares in SAIC-GM, SAIC GM China Hong Kong do the job SAIC paid to 8,450 million shares and 1% of the transfer of money SAIC-GM shares reverted to their own name, SAIC also Hong Kong by virtue of SAIC 100% indirect controlling stake in Shanghai GM to achieve 51% of the holding position.

The shares of the common action SAIC is also involved in Hong Kong by the SAIC common stock to common shares. And to 33 dollars / share subscription price of the 15,151,515 common shares of common stock equity.

SAIC bridgehead position of capital operation in Hong Kong has been self-evident. SAIC in India and other areas as the operation of capital was also a great idea, enough to SAIC our future operations left a rich imagination.

The proportion of the U.S. government shares the bottom line test

General Motors public offering a few days ago, SAIC chairman Hu Maoyuan and president Chen Hong has been to United States to subscribe for the final details of the finalized with GM, according to sources close to SAIC, SAIC shares the success of General Motors, the attitude of U.S. authorities is essential. The United Auto Workers union is clear that at the time, SAIC GM shares will damage the interests of American workers.

For SAIC GM shares touched a sensitive nerve of the U.S. authorities not difficult to understand, after all, a strategic industry in general is an important U.S. company, which has a Chinese state-owned SAIC has the background, so that ownership structure is inevitable that the U.S. authorities fear.

"In fact, whether from the SAIC or the common point of view, they want SAIC shares far more than the current ratio of 0.97%, SAIC acquired equity ratio is so limited, is more bound by political factors" national securities Analysts Cao Crane said.

But after all, shares of SAIC, or taken a first step in the international car prices, which is to bring the majority of domestic car prices, while the demonstration effect, but also for colleagues test out the U.S. authorities for Chinese enterprises investing in the United States a subtle change in attitude .

Helpless under the export of capital

Has been the expansion of international operations for SAIC are holding wholehearted enthusiasm, even after the defeat in a joint venture with Ssangyong, SAIC and quickly toward a cooperation with GM in India, is committed to the development of other Asian markets. This time the shares of common, though more symbolic than substantive, as SAIC has been the industry move closer to the international car prices generous. Because as a shareholder, SAIC will be more for the interests of common concern, SAIC can also participate in general shareholders meeting, etc. Good knowledge of the internal decision-making, operations, this gradual learning process will undoubtedly promote the SAIC to the international car prices growth.

Not difficult to find, SAIC overseas expansion model has quietly shifted, from the absolute control of Ssangyong, to secure and quite common in India, the fifty-five into, and then shares a common "go beyond", SAIC is to learn to play different roles.

In fact, the loss in Ssangyong, SAIC although suffered a cultural crisis, but failure in the final analysis is due to the lack of independent research and development capacity is weak Erzhi winning bargaining chips. Last December the other hand, the SAIC-GM-General generous 1% of the shares transferred to SAIC, while SAIC SAIC-GM-which has made 51% of controlling interest, but because GM still holds the technology, products of the absolute superiority thus changes in ownership structure also did not bring substantial changes in both the power game.

The weak capacity of independent R & D has become a major international car prices Mishap on the road, for safety considerations, could have a wide range of international road, for SAIC, it has become one there is only one option multiple-choice questions.

"Opportunities are only reserved for those who are prepared. SAIC hopes to go out in the absence of the product can go out. Roewe can pick out? I'm afraid not yet. Outward expansion opportunities, or if a Geely BYD SAIC will more than likely something, after all, they have independent intellectual property rights as a support. Currently, shares of SAIC can only rely on the way to take the first step towards internationalization, "said Jia Xinguang.


Small shareholders are also big risk

SAIC is common even if the minority shareholders, but because of the uncertainty of the prospects for GM, SAIC is still 0.97% of the shares to assume greater international risk.

GM previously disclosed under the third quarterly net income in three quarters of $ 2,160,000,000, and the first three quarters of total company net income reached 4.77 billion U.S. dollars. Meteoric rise to the profits of the year but the company sold or shut down by Pontiac, Saturn, Saab and Hummer brands achieve such child, simple, thin net profit growth for the general welcome, also paid a high price. As of October, GM's global market, market share has slipped to 20%.

At the same time, GM's European business continued to slump, according to company earnings, its third-quarter loss of European companies has reached 600 million U.S. dollars. Overall contraction in the product line situation, GM has lost can not afford to lose another Opel hit, but failed to help the European authorities, the reconstruction of Opel means spending a lot of money.

And out of bankruptcy protection for GM made major contributions toward the Chinese market is difficult to maintain the existing form of optimism. Cao Crane said, after blowout after two consecutive years, China's auto market next year is likely to show a growth in demand relative stagnation.

Also worrying the history of various general problems and these problems and can not be the same as the cut sub-brand - just down the cruel, you can easily solve. Over the past 17 months, GM has four easy to coach, head of the frequent changes brought not only the loss of executives, governance model of turbulence, but also increased the company's operations in the sunk cost, so that later were faced with the decision-making More and more concerns. In addition, the dealers excessive pension outstanding $ 26,000,000,000, a simmering labor dispute and other issues are not going to stop never have common problems.

SAIC-GM future depends on whether the capital increase

Although the 0.97% SAIC has brought a complex systemic risk, but that cross-shareholdings and international car prices is a mature model of development, whether in the future for SAIC holdings of common equity, Cao Crane said SAIC general capital increase is inevitable. Currently 0.97% of the ownership structure, whether general or SAIC are not satisfied, but the two sides in the context of Sino-US game, "obey the parents of" choice, in order to ensure the smooth progress of general IPO.

"SAIC replenishment rate of general and specific timetable should be based on general developments in the future. If the general good performance in the next few years, then the speed and magnitude of SAIC capital increase will be limited accordingly; but if true, as expected by the industry, general business dragged down by the European, or Chinese business stagnant, it will accelerate the rate of replenishment of SAIC, will stake a breakthrough. "Cao Crane said.