A Yue 7 SUV from GAC Group’s Trumpchi brand. Credit: GAC
- FAW is expected to become GAC’s second-largest shareholder after the deal, with no change in GAC’s ultimate control.
- GAC has withheld the target joint venture’s name and expects its A-share trading suspension to last no more than 10 trading days.
GAC Group (SSE: 601238) plans to issue shares to acquire part of China FAW’s stake in a vehicle-manufacturing joint venture and raise supporting funds.
GAC signed a letter of intent with China FAW on Monday, the company said in a filing today. The proposed transaction aims to integrate industrial resources between the companies.
Based on preliminary estimates, FAW would become GAC’s second-largest shareholder with strategic influence after the deal. This would establish an equity link between the 2 Chinese state-owned automakers.
GAC said the transaction is expected to constitute a major asset restructuring and a related-party transaction, but would neither change its ultimate controller nor constitute a backdoor listing.
The filing did not identify the target joint venture. GAC said it had temporarily withheld the name because the target involves an overseas-listed company, and would disclose it in a subsequent restructuring proposal.
The target could be FAW Toyota. FAW and GAC operate separate joint ventures with Toyota — FAW Toyota and GAC Toyota — providing a basis for that inference, though the filing has not confirmed this possibility.
GAC said the proposed deal aims to integrate industrial resources between a locally owned state enterprise and a centrally administered state enterprise, while improving the listed company’s operating performance.
The announcement provides a concrete transaction framework following speculation over the weekend about cooperation between FAW and GAC. Earlier market rumors suggested the companies were discussing an equity-based alliance or strategic restructuring.
GAC’s A-shares were suspended for the entire trading day on Monday pending disclosure of material information. In its latest filing, the company said its Shanghai-listed shares would remain suspended from Tuesday, with the suspension expected to last no more than 10 trading days.
The company plans to seek a resumption of trading after disclosing a board-approved restructuring proposal. The transaction remains at the planning stage, and its completion is uncertain.
Before the suspension, GAC’s Shanghai-listed shares were quoted at 5.09 yuan, down 37.85% this year.
The proposed transaction comes as China renews policy support for consolidation in the automotive industry.
Shao Ji, deputy director of the industry development department at the National Development and Reform Commission, said at a September 11 press conference that China would support reforms at large corporate groups to advance mergers and restructuring.
He said the government would support leading companies in integrating research, development and production resources to avoid duplicative competition in product design and technology development.
GAC’s shares were halted on Monday, with an employee saying a major announcement would be released after the market close.
