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February 25, 2010

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Tengzhong's Hummer bid still in the air

CHINA has rejected a bid by an obscure Chinese industrial equipment maker to buy General Motors' money-losing Hummer brand, a source said yesterday, dealing a possible death blow to the controversial deal.

Sichuan Tengzhong Heavy Industrial Machinery Co was believed to be lobbying behind the scenes for regulatory approval ahead of an end-February deadline to close the deal.

Officials of the Ministry of Commerce, which must approve all major foreign mergers and acquisitions in China, had said repeatedly in recent weeks that they had yet to receive any formal application from Tengzhong.

A source close to the companies told Reuters yesterday that the government had rejected the deal, but that Tengzhong and GM were still looking at alternatives.

Wang Chao, an assistant commerce minister, reiterated at a briefing yesterday that the ministry had yet to receive an application, and any reports that the ministry had rejected the bid were untrue.

Another source close to the companies told Reuters on Tuesday that Tengzhong could use an offshore vehicle to buy Hummer, which would allow it to skirt Chinese rules.

But such a route could put Tengzhong at loggerheads with government agencies in China, whose approval would be necessary to construct new manufacturing facilities proposed by Tengzhong and even sell the vehicles in the country.

"I am not surprised that Tengzhong failed to get government approval to buy a gas-guzzling brand like Hummer," said Li Mengtao, an analyst with Sinolink Securities. "Even if it can finally get its hands on Hummer through an overseas vehicle, it still needs government approval to make Hummer in China."

The deal was announced with fanfare last year, symbolizing China's move onto the world stage.


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