Geely chairman builds $9 billion stake in Germany's
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[February 24, 2018]
By Norihiko Shirouzu and Edward Taylor
BEIJING/FRANKFURT (Reuters) - The chairman
of Chinese carmaker Geely [GEELY.UL] has built up an almost 10 percent
stake in Mercedes-Benz owner Daimler <DAIGn.DE>, making a $9 billion bet
that he can push through an alliance to access the German company's
The purchase by Li Shufu, Geely's founder and main owner, means China's
largest privately-owned automaker is now Daimler's biggest shareholder.
Geely said on Saturday there were no plans "for the time being" to raise
the stake further. Instead, it will seek to forge an alliance with
Daimler, which is developing electric and self-driving vehicles, to
respond to the challenge from new competitors such as Tesla <TSLA.O>,
Google <GOOGL.O> and Uber, which are all working on their own new
"No current car industry player is likely to win this battle against the
invaders from outside without friends. To achieve and assert
technological leadership, one has to adapt a new way of thinking in
terms of sharing and combining strength. My investment in Daimler
reflects this vision," Li said.
Only two or three manufactures will likely survive in the auto industry
going forward, a source familiar with Li's thinking told Reuters,
prompting Geely to seek access to carmakers with a technological edge.
Its move on Daimler poses a challenge to the German carmaker, since
Mercedes-Benz already has an industrial alliance to develop cars and
trucks with Renault-Nissan <RENA.PA>, which owns a 3.1 percent stake in
Daimler, and has announced plans to build electric cars with existing
Chinese joint-venture partner BAIC Motor Corporation <1958.HK>.
Bernstein Research analyst Max Warburton said: "It's not clear what
Geely wants and how it's going to work, but we view this move as part of
a broader Chinese move to gain involvement in the European automotive
"China wants a payback after spending a decade gifting the European auto
industry super-normal growth and profits. Now it wants more direct
access to technology, brands and profits," he wrote in a note late on
Friday, shortly after the stake was disclosed in a regulatory filing.
German state secretary at the economy ministry, Matthias Machnig, said
EU trade ministers meeting informally next week in Sofia would discuss
how better to protect strategically important European companies from
"It is important that Europe keeps a close eye on which key European
technologies foreign strategic investors are setting their sights on,"
Machnig did not comment specifically on Daimler.
Daimler is the only one of Germany's three carmakers not to be
controlled by a family. Volkswagen <VOWG_p.DE> is majority-owned by the
Porsche-Piech clan, while BMW <BMWG.DE> is 47 percent owned by Susanne
Klatten, Germany's richest woman, and her brother Stefan Quandt.
Zhejiang Geely Holding has been on an expansion drive. It owns Volvo
Cars, LEVC, the maker of London's black cabs, and last year took a
majority stake in sports car maker Lotus, a 49.9 percent stake in
Malaysian automaker Proton, a $3.3 billion stake in Volvo Trucks and
control of flying car start-up Terrafugia.
Analyst Arndt Ellinghorst of Evercore ISI said: "We only believe that
Geely would consider an investment of this magnitude if there was a more
significant industrial opportunity from cooperation between Geely/Volvo
IF AT FIRST...
The stake purchase follows an initial approach last November, when Li
sought to buy a Daimler stake as a way to access Mercedes-Benz
technology for electric cars and trucks, including battery technology,
to help Geely comply with a Chinese crackdown on pollution.
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Li Shufu, chairman of Geely Holdings, speaks at the China-UK
business forum in Shanghai, China February 2, 2018. REUTERS/Stringer
Geely sees potential in Daimler because it is developing high-speed internet
connections for autonomous cars at a time when Li believes satellite-based
internet connections could become more important for the auto industry, the
source familiar with his thinking said.
In November, Geely asked Daimler to issue new shares so it could buy a stake,
but the German company turned down the offer saying it did not want to dilute
existing shareholders, sources at the time told Reuters.
Li changed tactics, and quietly amassed a stake of 9.69 percent worth $9 billion
at Daimler's current share price.
Normally, investors are required to inform the German financial regulator and
the market when their share of a public company reaches 3 and then 5 percent.
German watchdog Bafin did not immediately respond to requests for comment on
whether it was looking into Geely's acquisition of the Daimler stake.
The German economy ministry said in a statement emailed to Reuters: "There are
legal regulations that have to be adhered to in takeovers. It is the duty of
investors to follow these and to check them."
Chinese investors in German technology companies have tended to take a
consensual approach, buying incremental stakes in companies such as robotics
firms Kuka and Kion, typically after long consultation with management and other
Daimler said in a statement: "Daimler is pleased to announce that with Li Shufu
it could win another long-term orientated shareholder, which is convinced by
Daimler’s innovation strength, strategy and future potential," the German
company said in a statement.
"Daimler knows and appreciates Li Shufu as an especially knowledgeable Chinese
entrepreneur with clear vision for the future, with whom one can constructively
discuss the change in the industry."
The source said Daimler and Geely had not held concrete talks about how to
structure a potential joint venture, adding: "You know we have to become a
stakeholder in order to engage."
Swedish truck maker AB Volvo, one of Geely's other investments, has objected to
the Chinese firm's stake-building in Daimler, citing anti-trust concerns, the
"We will protect interests of both companies by abiding laws in the country and
the company's governance structure. We are not seeking to have a controlling
power in Daimler. We are just one of the investors in that given company," the
In early February, Geely began courting Germany's automotive establishment in a
carefully timed public relations campaign. Li gave a video statement to
Germany's Car Symposium, an annual automotive congress attended by senior
Li underlined that Geely's stewardship of Sweden's Volvo Cars had contributed
towards "growth and prosperity" in Europe.
His statement was followed by a keynote speech by Geely board member Carl-Peter
Forster, a former BMW board member and the former head of German carmaker Opel.
Forster explained that in the areas of electromobility and autonomous driving
there should be more cooperation.
"We are in competition with one another, but should cooperate in areas where it
makes sense," Forster told the audience.
(Additional peporting by Douglas Busvine in Frankfurt, Jan Schwarz in Hamburg,
Ankit Ajmera in Bengaluru and Gernot Heller and Madeline Chambers in Berlin;
Editing by Jacqueline Wong and Mark Potter)
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