GAC merges GAC Changfeng joint venture Mitsubishi to clear the last obstacle

According to the news of the newspaper, after nearly five months of suspension, GAC Group intends to adopt the method of share exchange to absorb the plan for the merger of the entire stock of GAC Changfeng (600991.SH), which has finally been approved by relevant departments. This is also the case for Guangzhou Automobile Group and Mitsubishi Motors. 50: The full-scale joint venture eliminates the final capital barrier. On the morning of March 23rd, GAC Group will hold a press conference to announce relevant issues.

Secondary reorganization

Two years ago, GAC Group acquired a 29% stake in GAC Changfeng at a price of 1 billion yuan, becoming the largest shareholder of the latter. The remaining major shareholders were Changfeng Automobile 21.94% and Mitsubishi Automobile 14.59% respectively. On the same day, when this newspaper interviewed Lu Qi, secretary of Guangqi Group, she said that the acquisition of Changfeng Motor was the first step of the package plan.

Since then, various rumors about GAC Group’s listing of GAC Changfeng A-shares, further joint ventures with Mitsubishi Motors, and Mitsubishi’s exit from GAC Changfeng have continued until October 28, 2010 when GAC Changfeng was suspended. GAC Changfeng stated that Guangzhou Automobile Group and Mitsubishi Motors have signed a "Memorandum of Cooperation", and GAC Group intends to withdraw the company from the Shanghai Stock Exchange through absorption of mergers, offer for bids, or other appropriate means permitted by Chinese laws and regulations and agreed by Mitsubishi Motors. Through follow-up reorganization, the company has become or is based on the company's assets to establish a joint venture company in which GAC Group and Mitsubishi Motors respectively hold 50% of the shares.

Zhang Fangyou, chairman of GAC Group, once stated that since Changfeng is a listed company, if the acquisition of equity exceeds 30%, it will involve a comprehensive offer in accordance with regulatory requirements. Therefore, "the first acquisition of 29% of the equity, advanced to say." At present, the reorganization of GAC Changfeng is carried out according to the original plan. The problem to be solved is that GAC Group holds more equity.

Zhang Fangyou stated that the reorganization involves several aspects, one is the form of reorganization, acquisition or absorption of mergers; the other is the establishment of a 50-50 joint venture with Mitsubishi; and third, Changfeng’s original independent brand Cheetah from GAC Changfeng Peel out. In the future, Changfeng Cheetah will be the branch of Guangzhou Automobile Passenger Vehicle and will be operated by GAC. In other words, in the future, GAC passenger vehicles will have two independent brands: Chuanqi and Cheetah.

"In this way, through the second reorganization, we have realized a joint venture with Mitsubishi and also realized other cooperation with Changfeng, and at the same time added a base for our own brand."

For Mitsubishi, Zhang Fang has a very strong point of view. He believes that “the technology in some areas will even surpass Toyota and Honda. The success of cooperation with them will depend on the transformation of GAC to them.”

GAC Group finally adopted the swap absorption merger plan instead of the tender offer, mainly because of cost and the need for subsequent development. The stock-to-share mergers and acquisitions do not involve the flow of cash, which can avoid absorbing a large amount of cash outflows during the merger process, and maintain the corporate strength of the merged company, ie, the surviving company GAC Group, which is beneficial to the long-term development of the company.

Changfeng Houlu

Guangzhou Automobile Changfeng, which uses the SUV as the main model, mostly sells its own brand Cheetah and the imported Mitsubishi Pajero. However, since 2003, Changfeng Motor’s sales have been around 30,000. In 2010, GAC Changfeng sold 46,698 vehicles. Although it increased by 27.36% year-on-year, it still lags far behind the current market-leading SUVs.

After GAC Group entered Changfeng, Fu Shoujie took office as General Manager and has been actively promoting the development of the GAC Changfeng Auto Project CP2. It is proposed that GAC Changfeng must achieve three levels of transformation: The first is the transition from a single SUV manufacturer to a full range of passenger vehicle companies, followed by the shift of products from professional SUV products to ordinary family vehicles, and in terms of ideological concepts Reverse from B2B to B2C.

At the Guangzhou Auto Show at the end of 2010, GAC Changfeng exhibited the CP2 sedan and plans to go public in 2011. However, the future of this A-class Cheetah sedan into the Guangzhou Automobile passenger car, as there has been a major attack on the high-end market, may be able to add to its slightly lower level of a brand. As Cheetah SUV has a certain market reputation in China, it is expected that the SUV will be able to achieve a synergy with next year's Guangzhou Automobile Passenger Vehicle.

After the Guangzhou Automobile Group’s share exchange merger and absorption of GAC Changfeng and the establishment of a joint venture with Mitsubishi, Changfeng Group had to withdraw from the vehicle production industry because it lost the vehicle’s production qualification. According to media reports, GAC Group plans to establish a 50:50 parts joint venture company with Changfeng Group's part companies that have been spun off from Changfeng Group in the form of capital injection. It supplies GAC Group's two vehicle bases in Changsha, GAC Fiat and Guangzhou Automobile Mitsubishi's most parts and components.

In other words, the Cheetah brand will begin to leave Changfeng and enter the Guangzhou Automobile Group system. Changfeng Group will also gradually fade out of the passenger car manufacturing business, and will be more in the identity of the spare part supplier. At present, Changfeng Group is fully introducing international parts and components companies. According to relevant sources in Changsha, Changfeng Group is currently applying for an electric vehicle production qualification certificate, which does not rule out the possibility that Changfeng Group will seek another start to enter the electric vehicle industry.

Mitsubishi center of gravity

The Guangzhou Automobile Mitsubishi project has been approved by the SASAC and was approved on January 31. The official listing time is from May to June. In addition to the original Pajero models will continue to produce, the Guangzhou Automobile Group and Mitsubishi both temporarily set the new joint venture company's first imported domestic models for Mitsubishi Jin Hyun. This is a compact SUV, which is an important model in Mitsubishi's global products, with import prices ranging from 18.38 to 239,800 yuan.

At present, Mitsubishi has two joint-ventures, GAC Changfeng and Southeast Auto, and Mitsubishi owns 28.5% and 14.59% respectively. As early as last year's Beijing Auto Show, Mitsubishi Motors President Yoshiko Yasushi publicly stated that Mitsubishi needed to "re-start all over again" in China by establishing a joint-venture company with a half-shareholding.

Seven years ago, Mitsubishi brewed to expand its equity in Changfeng Automobile through internal capital increase. In May 2006, Mitsubishi and Changfeng signed a memorandum to form a joint venture company, planning to increase their shareholding in Changfeng to 14.59%. To 30%, in 2007, this plan evolved into a 50:50 joint venture with Changfeng. However, none of the above arrangements could be completed.

In January 2011, Yizi Xiu came to Changsha again with hope, but this time it seemed to be a complete success. He claimed that Guangqi Mitsubishi's first car in Changsha will be put on the market in the first half of 2012, and the new joint venture will not only produce SUVs, but also invest in new models. “I hope to achieve the 300,000 production level in Changsha as soon as possible, so that Mitsubishi will reach an annual sales of 500,000 vehicles in China.”

According to the information released by both parties in the previous period, after the establishment of the Guangzhou Automobile Mitsubishi Joint Venture Co., Ltd., it will mainly produce SUV models. Mitsubishi's other co-operation project, Southeast Automotive, produces Mitsubishi-brand cars and MPVs.

The above remarks of Yi Zixiu seem to be understood as that, once a full-scale joint venture with GAC Group is implemented, Mitsubishi's focus in China will shift from Southeast Motor.