Cars

Guangzhou Auto moves closer to HK IPO

(Agencies)
Updated: 2010-07-16 15:34

Guangzhou Automobile Group Co moved closer to a listing in Hong Kong when shareholders of its Hong Kong unit Denway Motors Ltd approved a buyout offer from the Chinese automaker.

A "big proportion" of investors voted in favor of the buyout plan, Denway Chairman Zhang Fangyou said after a shareholders' meeting in Hong Kong today. Denway investors will receive shares in Guangzhou Auto under the deal.

Guangzhou Auto, a partner of Toyota Motor Corp and Honda Motor Co in China, has applied to begin trading its shares on the Hong Kong stock exchange's main board on August 30. The deal offers access to Denway's factories in southern China and opens more fund-raising channels to help Guangzhou Auto compete with SAIC Motor Corp and Dongfeng Motor Group Co in the world's largest auto market.

"By becoming a publicly traded company, Guangzhou Auto will be freed up to raise more funds," said Zhang Jing, an analyst at Phillip Securities (HK) Ltd in Shanghai. "The deal is good for Denway shareholders too, because Guangzhou Auto has greater business scope and is more competitive."

The Guangzhou, South China-based company said on June 8 it would raise a bid for the 62 percent of shares in Denway that it doesn't already own. It will exchange about 0.47 share for each share in Denway, up from 0.38 it offered in May, Guangzhou Auto said. The unlisted carmaker said May 19 its shares are worth as much as HK$14.49 apiece.

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Denway rose 0.3 percent to HK$3.78 yesterday before trading in the shares was suspended pending the shareholder vote. The stock, which has declined 23 percent this year, has climbed 6.8 percent since the June 8 announcement of the improved offer.

Guangzhou Auto may record a profit of 3.76 billion yuan this year, without taking into account the offer for Denway shares, the company said on May 19. Guangzhou Auto's net income was 2 billion yuan last year.

The automaker aims to boost annual production capacity to more than a million vehicles by the end of this year, from 606,600 in 2009.

Guangzhou Auto also makes Camry sedans and Highlander sport-utility vehicles in a partnership with Toyota Motor Corp, the world's largest automaker, in Guangzhou.