Tuesday, June 2, 2009

Who's Not Buying Hummer / Chery's New not-so-Private Equity

Who's Not Buying Hummer

News surfaced today that GM has finally found a buyer for its Hummer division. The buyer is Sichuan Tengzhong Heavy Industrial Machinery, and the undisclosed price is rumored to be in the neighborhood of $500 million.

This was preceded by the improbable story back in February that the previously unheard of Sichuan Auto was rumored to be the buyer of Hummer. The management of Sichuan Auto (not affiliated with Sichuan Tengzhong) appeared to have been genuinely perplexed as to how their company, with only $146 million in assets at the time, could possibly buy Hummer.

Now it would seem that a leaker close to the story apparently got the Sichuan part right, but not the actual company that would ultimately buy Hummer.

How this company will manage to make Hummers conform to China's newly proposed fuel economy standards is a mystery.

Chery's New Not-So-Private Equity

Let's get this out of the way first. Chery is NOT a private company. Its controlling shareholder is the City of Wuhu in Anhui Province. Its next largest shareholder is Anhui Province.

Perhaps a lot of journalists continue to confuse Chery with a private company because, according to some people I have talked to, it "acts like a private company". Well, from what I have observed, even that notion is highly debatable.

Without further belaboring the point, I'll move on to today's news which is that Chery has just received two billion yuan ($293 million) in "private equity" funding.

It has been no secret that Chery is dying to do an initial public offering (IPO) in recent years, but for whatever reason, continues to be kept out of the equity markets. Last December, China's Export-Import Bank provided Chery with 10 billion yuan in loans. This was presumably because Chery is China's largest exporter of cars.

Today's additional two billion yuan in funding comes from a "private equity" consortium that includes Bohai Industrial Investment Fund Management and CDH Investments. How much of these funds are actually private? Well, we're not supposed to know that, but we do know that the majority owner of the Bohai Management company is none other than the Bank of China. And CDH has raised a large portion of its funding from China's Social Security Fund.

This equity is hardly "private".


  1. According to The Guardian, they are "only" paying 150-200 m US$ for Hummer:


  2. I've never been a fan of the over-the top big cars, but I wouldn't categorize myself as a hater.

    I hope the Chinese have better luck with the card than we did.

  3. Just read on Financial Times (Germany) that the purchase price was apparently revised downwards to 100 m US$ in ongoing negotiations. The whole deal sounds pretty tentative to me...


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