Malaysian conglomerate DRB-Hicom Bhd agreed to sell a 49.9 percent stake in unprofitable automaker Proton Holdings Bhd to Chinese billionaire Li Shufu’s (李書福) Zhejiang Geely Holding Group (浙江吉利).
Geely is also to buy a 51 percent stake in British sports car maker Lotus Cars Ltd from Proton, with the two parties expecting to sign a final agreement before the end of July, the Chinese company said yesterday.
DRB-Hicom is still negotiating on the transaction price, after reaching agreement on a ballpark figure, group managing director Syed Faisal Albar told at a news conference in Putrajaya, Malaysia.
Photo: AP
The Chinese automaker, which acquired Sweden’s Volvo Cars in 2010, said the agreement lays the foundation for it to explore synergies with Proton and Lotus in areas such as research and development, manufacturing and marketing.
Geely will seek to transform the two automakers and aims to build Proton into the most competitive brand in Malaysia and a leading nameplate in Southeast Asia.
“With Proton and Lotus joining the Geely Group portfolio of brands, we strengthen our global footprint and develop a beachhead in Southeast Asia,” Geely chief financial officer Daniel Li (李東輝) said in the statement. “We also aim to unleash the full potential of Lotus Cars and bring it into a new phase of development, thanks to our experience accumulated through Volvo Car’s revitalization.”
Proton, controlled by Malaysian tycoon Syed Mokhtar al-Bukhary’s DRB-Hicom, was set up in 1983 by former Malaysian prime minister Mahathir Mohamad to steer the Southeast Asian nation’s industrialization plan.
The agreement marks the end of a lengthy sale process for the automaker, which had to seek a foreign partner as part of conditions for a government rescue loan.
For Geely, the purchase comes about seven years after it bought Volvo Cars from Ford Motor Co for US$1.5 billion.
The investment “would allow Geely to move into the ASEAN market efficiently with a ready-made aftermarket network, which otherwise would take years,” JSC Automotive Consulting Singapore-based managing director Jochen Siebert said. “Li Shufu probably knows that the European, US, Japanese and [South] Korean markets are not good targets for a new player, while ASEAN could become the next big thing.”
Proton has two factories in Malaysia — one in Shah Alam and the other in Tanjung Malim — with a combined capacity to build 350,000 vehicles per year.
DRB-Hicom said in a February statement that a new partner would help improve the utilization rate at the Tanjung Malim plant.
Lotus Cars, known for its lightweight chassis technology, might help Geely in meeting stringent fuel economy rules set to kick in over the next few years.
In 2012, Proton bought car engine technology from state energy company Petroliam Nasional Bhd when it was involved in motor sports.
While Geely is to own a majority stake in Lotus Cars, Etika Automotive is to hold 49 percent of the British automaker, Syed Faisal said.
When DRB-Hicom privatized the automaker in 2012 after buying a 43 percent stake from state-owned investment firm Khazanah Nasional Bhd, the deal valued Proton at 2.8 billion ringgit (US$651.5 million at the current exhange rate).
With sales flagging, Malaysia’s government in April last year stepped in to make a 1.5 billion ringgit loan to the automaker, which allowed it to avoid defaulting on obligations to suppliers. The agreement came with a rider that Proton find a major new investor to put it on a more sustainable financial footing.
Geely is to help repay Proton’s loan from the government as part of the deal, Malaysian Deputy Minister of Finance Johari Abdul Ghani said at the news conference in Putrajaya.
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