Key facts
- Guangzhou Automobile Group (GAC) and FAW Group have signed a letter of intent for GAC to acquire part of FAW's stake in a vehicle manufacturing joint venture.
- The transaction involves GAC issuing A shares to FAW and a supporting capital raise.
- FAW Group is expected to become GAC's second-largest shareholder.
- GAC's A-shares were suspended from trading on the Shanghai Stock Exchange on September 14.
- The target joint venture's name is withheld due to its involvement with an overseas-listed company.
- The deal requires internal and regulatory approvals and is not yet finalized.
Guangzhou Automobile Group (GAC) has signed a letter of intent with fellow state-owned automaker FAW Group to acquire a portion of FAW's stake in an undisclosed vehicle-manufacturing joint venture through a share issuance. The proposed transaction also includes a capital raise to support the venture. If finalized, FAW Group would become GAC's second-largest shareholder, wielding strategic influence.
GAC's A-shares were suspended from trading on the Shanghai Stock Exchange starting September 14, with the suspension expected to last no more than 10 trading days, as the company disclosed "inside information." The name of the target joint venture remains undisclosed due to its involvement with an overseas-listed company. GAC stated that a definitive agreement has not yet been reached and the transaction is contingent upon internal and regulatory approvals.
This potential tie-up occurs amid a broader government-backed initiative to consolidate China's state-owned automotive sector, which has been grappling with significant losses and excess production capacity. Both FAW and GAC are established joint-venture partners with Toyota Motor Corp in China. Prior to the trading suspension, GAC's Shanghai-listed shares had declined 37.85% year-to-date, trading at 5.09 yuan.