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Geely set to raise cash with bond issue
By Alison Leung and Michael Flaherty |
September 17, 2009, Thursday
|
Print Edition
Print Edition
GEELY Automotive, the Chinese car maker whose parent is eyeing Ford's Volvo unit, is set to raise capital through a bond issue in a move that may provide funding for a Volvo bid.
Analysts, however, said the bonds could also be used for Geely to expand its car making capacity rather than to launch an immediate bid for Ford's US$2 billion plus Swedish car unit.
Geely said last week that its parent was considering a bid for Volvo with a local government-backed investment firm.
A successful deal would boost the profile of Geely, a small, homegrown car maker, and give it access to Volvo technology it needs to upgrade its cars.
Yet some analysts have raised concerns about whether the Chinese car maker will be able to make the acquisition work.
"The move is a bit of a surprise to the market," said Vivien Chan, analyst at Sinopac Securities Corp.
"We had a meeting with the company before, and they did not mention any funding needs."
In March, Geely bought Australian automatic transmission supplier Drivetrain System International for US$40 million, but a company executive said deal was paid for from proceeds of a share placement in May.
A spokesman for the Hong Kong-listed company said the suspension of trading in Geely shares yesterday was related to a "major transaction."
He would not clarify.
The Hong Kong exchange said the Geely suspension was pending an announcement related to a proposed issue of convertible bonds and warrants. No financial details were immediately available.
Geely, valued at about US$1.68 billion, is working with British partner Manganese Bronze Holdings Plc to make and sell London's iconic black cabs in China.
Analysts, however, said the bonds could also be used for Geely to expand its car making capacity rather than to launch an immediate bid for Ford's US$2 billion plus Swedish car unit.
Geely said last week that its parent was considering a bid for Volvo with a local government-backed investment firm.
A successful deal would boost the profile of Geely, a small, homegrown car maker, and give it access to Volvo technology it needs to upgrade its cars.
Yet some analysts have raised concerns about whether the Chinese car maker will be able to make the acquisition work.
"The move is a bit of a surprise to the market," said Vivien Chan, analyst at Sinopac Securities Corp.
"We had a meeting with the company before, and they did not mention any funding needs."
In March, Geely bought Australian automatic transmission supplier Drivetrain System International for US$40 million, but a company executive said deal was paid for from proceeds of a share placement in May.
A spokesman for the Hong Kong-listed company said the suspension of trading in Geely shares yesterday was related to a "major transaction."
He would not clarify.
The Hong Kong exchange said the Geely suspension was pending an announcement related to a proposed issue of convertible bonds and warrants. No financial details were immediately available.
Geely, valued at about US$1.68 billion, is working with British partner Manganese Bronze Holdings Plc to make and sell London's iconic black cabs in China.
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