After more than a year of speculation, it has emerged that Geely has agreed to purchase a 49.9% stake in Proton, according to a report by Reuters. Sources told the news agency late yesterday that the Chinese carmaker has beat out rival bidder PSA Group.
Parent company DRB-Hicom requested a suspension of trading of its shares yesterday pending an announcement. Its spokespeople could not be reached for a comment after office hours, and PSA also did not immediately return calls and messages seeking for a comment.
The search for a foreign strategic partner (FSP) commenced as part of the conditions of the government’s RM1.5 billion soft loan to the national carmaker, which was approved in April last year. Among those also rumoured to be in the running were Renault and Suzuki – the latter had signed a collaboration with Proton in 2015, which resulted in the production of the Proton Ertiga.
Geely is reportedly eyeing Proton’s Tanjung Malim plant as a base to build right-hand drive versions of its Lynk & Co 01 SUV for export to various RHD markets such as the UK and Australia. The company is also said to have plans to establish Proton as an entry-level brand within its overall structure.
In actual fact, the deal almost fell through, with Geely president An Conghui saying as recently as March that the company had backed out – coming after reports that Geely was planning to pull its bid due to DRB-Hicom’s indecision regarding the partnership. Soon after, however, it was said that the stunt was simply a negotiation tactic, with the company returning to talks after prospects with PSA became less certain.
Yesterday, it was reported that the government had extended a line of credit to Proton amounting to RM1.7 billion as a further stopgap measure before an FSP is secured. The news came after it reportedly requested between RM1.5 billion and RM1.8 billion in April to cover massive losses in its operations, as the initial amount provided in the soft loan was almost immediately used up to pay off vendors.
The company is expected to record major losses in the financial year 2017 in the midst of slowing sales, based on the RM1.426 billion net loss it reported in FY2016 ending March 31. The company sold just 24,992 vehicles in the first four months of the year, despite the launch of four new models – the Perdana, Persona, Saga and Ertiga – last year.
Meanwhile, the Financial Times has reported that Geely will also take a majority stake in Lotus of between 50% to 75% as part of the deal, according to two sources aware of the agreement. Geely is said to be looking to take advantage of the British sports car maker’s expertise in lightweight technology and composite materials, in order to help it meet strict emissions targets in China.
It is said that the company aims to bring some much-needed aid to Lotus, sales of which have fallen by 242 vehicles to 1,584 units; it has also lost £27.6 million (RM153.9 million) in the financial year ending March 31. The entire deal with Proton is subject to due diligence and final negotiations around terms such as price, said one person with knowledge of the details.
UPDATE: DRB-Hicom has announced that Zhejiang Geely will be its foreign strategic partner (FSP), with Geely acquiring a 49.9% equity stake in Proton. The deal, which is subject to regulatory and shareholder approval, will also see Geely acquire a majority stake (51%) of Lotus from Proton.
