1. China’s Geely said to buy stake in Malaysian carmaker Proton 

China’s Geely said to buy stake in Malaysian carmaker Proton 

Malaysian conglomerate DRB-Hicom Bhd. agreed to sell a stake of almost 50 percent in its unprofitable carmaker Proton Holdings Bhd. to Chinese billionaire Li Shufu’s Zhejiang Geely Holding Group, according to people with knowledge of the matter.

By: | Published: May 24, 2017 1:41 PM
China’s Geely said to buy stake in Malaysian carmaker Proton. (Reuters)

Malaysian conglomerate DRB-Hicom Bhd. agreed to sell a stake of almost 50 percent in its unprofitable carmaker Proton Holdings Bhd. to Chinese billionaire Li Shufu’s Zhejiang Geely Holding Group, according to people with knowledge of the matter. DRB-Hicom’s board of directors approved Geely’s proposal on Tuesday, the people said, asking not to be identified as the information is private. Proton also owns British sports-car maker Lotus Cars. An announcement is planned as early as Wednesday, the people said. Trading in DRB-Hicom’s stock will be suspended pending a release, the Shah Alam-based company said in a stock exchange statement.

Proton, controlled by Malaysian tycoon Syed Mokhtar Al-Bukhary’s DRB-Hicom, was set up in 1983 by former Prime Minister Mahathir Mohamad to steer the Southeast Asian nation’s industrialization plan. If completed, the transaction would mark the end of a lengthy sale process for the carmaker, which had to seek a foreign partner as part of conditions for a government rescue loan. For Geely, the purchase would be the biggest acquisition since it bought Sweden’s Volvo Cars from Ford Motor Co. for $1.5 billion in 2010.

DRB-Hicom declined to comment. A representative for Geely didn’t immediately answer calls placed outside of regular business hours. PSA Group, which was competing with Geely for the Proton stake, declined to comment.

Also watch:

An investment “would allow Geely to move into the ASEAN market efficiently with a ready-made after-market network, which otherwise would take years,” said Jochen Siebert, the Singapore-based managing director of JSC Automotive Consulting, referring to the grouping of Southeast Asian nations. “Li Shufu probably knows that the European, US, Japanese and Korean markets are not good targets for a new player, while ASEAN could become the next big thing.”

Proton has two factories in Malaysia — one in Shah Alam and the other in Tanjung Malim — with a combined capacity to build 350,000 vehicles a year. DRB-Hicom said in a February statement that a new partner would help improve the utilization rate at the Tanjung Malim plant.

Lotus Cars, known for its lightweight chassis technology, may help Geely in meeting stringent fuel-economy rules set to kick in over the next few years. In 2012, Proton bought car engine technology from state energy company Petroliam Nasional Bhd. when it was involved in motor sports.

When DRB-Hicom privatized the carmaker in 2012 after buying a 43 percent stake from state-owned investment firm Khazanah Nasional Bhd., the deal valued Proton at 2.8 billion ringgit ($645 million). With sales flagging, Malaysia’s government stepped in April 2016 to make a 1.5 billion ringgit loan to the carmaker, which allowed it to avoid defaulting on obligations to suppliers. The agreement came with a rider that Proton find a major new investor to put it on a more sustainable financial footing.

  1. No Comments.

Go to Top