General Motors repurchases 1% Shanghai GM equity countdown

General Motors chairman Ickson said on Valentine's Day this year that he will buy back 1% Shanghai GM shares. In the near future, the solution may be announced.

On October 27, SAIC Motor Co., Ltd. issued an announcement saying that the company and GM China Co., Ltd. jointly invested to establish SAIC General Motors Sales Co., Ltd. (tentative name, actual name is based on industrial and commercial approval registration), registered capital of 4900 Million US dollars, of which the company contributed 24,990,000 US dollars in cash, accounting for 51% of total shares.

General Motors (China) also stated that after the establishment of the joint venture sales company, if GM exercises the 1% equity repurchase rights of Shanghai General Motors, according to the current Chinese accounting standards, SAIC can still achieve the merger of Shanghai GM sales revenue, which is maintained by the company. The basic stability of the financial statements and the maintenance of a good image of the capital market are of great significance.

“This also means that GM has the conditions to buy back 1% of Shanghai General Motors,” General Motors (China) stressed.

The alternative plan to repurchase 1% of equity. General Motors China told reporters that SAIC and GM’s board of directors have all approved the establishment of a joint venture sales company. The official establishment of the company has yet to be reviewed and approved by the relevant national authorities. There is no timetable. The establishment of a joint venture sales company will not affect Shanghai GM's integrated operation and research, production, and sales operations. Further relevant information needs to be informed after the formal establishment of the joint venture sales company.

In 2009, when General Motors sold 1% of Shanghai General Motors, the two parties negotiated that the transfer was valid for two years. Two years later, General Motors had the right to repurchase the 1% equity.

Since GM completed the world's largest IPO to emerge from the crisis last year, Exxon has not remembered selling 1% of Shanghai GM’s shares during the crisis, and eventually repaid the shares of 1% Shanghai GM during the Valentine’s Day visit to China this year.

Obviously, the sooner you buy back, the better. The Wall Street Journal quoted Exxon as saying that General Motors had the option to buy the 1% stake and planned to exercise the option after SAIC completed the restructuring. This is basically in line with SAIC's restructuring schedule. SAIC is expected to complete the overall listing by the end of the year.

Exxon believes that it is very important to have a half-share partnership. After 10 years, Shanghai GM may develop into a company with an annual output value of 30 to 40 billion U.S. dollars instead of a company of 20 billion U.S. dollars.

At present, Shanghai General Motors has occupied the top three positions in the domestic passenger vehicle market for a long time. In 2010, it became the first passenger vehicle company with an annual output of over 1 million vehicles. In 2011, it also achieved a cumulative output of 5 million in less than 14 years. The record of the vehicle.

Premium or parity repurchase?

At the end of 2009, SAIC Motor purchased a 1% stake in Shanghai General Motors from GM at a cost of US$84.5 million. After repurchasing the repurchase schedule, the price of GM’s repurchase of 1% Shanghai GM shares is still a mystery. Will GM choose premium or repurchase?

An insider of SAIC told reporters that “Shangqi is not able to make a losing business. Compared to two years ago, the US dollar depreciated significantly and the GM repurchase price was definitely higher than the original transaction price.”

According to informed sources, apart from the requirement to meet the consolidated financial statements, SAIC also bite tightly on the repurchase price, and the transaction price may be around US$100 million.

National Securities Auto Analyst Cao He believes that Shanghai Automotive and General Motors have signed an agreement on the development of a new generation of electric vehicle platforms jointly by electric vehicles. This may be a bargaining chip for both sides' repurchase negotiations. In general, multinational cars are rarely in the core technology field. Sharing with domestic auto companies, Shanghai Automotive will certainly not be too low, but it may sacrifice some benefits for technical cooperation. "Shanghai Automotive will certainly not lose money, but based on the cooperation between the two sides, Shanghai Automotive will not open its doors to General Motors and it should seek a fair value range," said Cao He.