Geely transfers Proton shares to another subsidiary to reduce ‘connected transactions’ – what is this about?

Geely transfers Proton shares to another subsidiary to reduce ‘connected transactions’ – what is this about?

Last month, there was an announcement by Bursa Malaysia-listed DRB-Hicom, which said that Zhejiang Geely Holding (ZGH), via wholly-owned subsidiary Geely International (Hong Kong) Ltd (GIHK), has transferred its entire equity interest in Proton to another subsidiary within the wider Geely group.

In a filing with the local bourse, the conglomerate said the transfer comprised 547.2 million ordinary shares, representing 49.9% equity interest in Proton (the rest is owned by DRB) and the recepient is a company called Linkstate Overseas Ltd.

“The transfer of Proton shares from GIHK to Linkstate will not have any effect on the net assets, earnings, gearing, share capital, shareholding structure and substantial shareholders’ shareholdings of the DRB-Hicom group for the financial year ending Dec 31, 2023,” the company said, branding the move as “internal restructuring in Geely group”.

Geely transfers Proton shares to another subsidiary to reduce ‘connected transactions’ – what is this about?

Proton shareholding in 2023 – click to enlarge

From Geely’s left hand to its right hand, so there’s nothing to look at? Asked by readers, we did some checking and here are the findings.

First, the parties involved. ZGH is the holding company that is fully controlled by founder Li Shufu and his proxy, and ZGH is the sole shareholder of investment holding company GIHK, which before this, held the 49.9% stake in Proton. Geely values the equity at RMB 1,063 million (RM689.3 million).

The Proton stake has been transferred to Linkstate, a direct wholly-owned subsidiary of Geely Automobile Holdings Limited, a Hong Kong-listed company we’ll call Geely Auto. Just think of Geely Auto as the Geely brand, the carmaker, and ZGH as the holding company belonging to Li, who controls about 40% of Geely Auto. According to Geely Auto’s HKSE filing dated January 20, the placement of Proton under its umbrella streamlines things, financially.

“The Group currently sells automobile parts and components and provide R&D and technology licensing services to the Geely Holding Group in relation to the manufacture of Proton-branded vehicles. After completion of the Proton Acquisition, the Group will directly sell automobile parts and components and provide R&D and technology licensing services to the Proton Group, which will then cease to be a connected person of the Company,” Geely Auto said.

Geely transfers Proton shares to another subsidiary to reduce ‘connected transactions’ – what is this about?

The Zhejiang Geely Holding Group and its companies – click to enlarge

“The above arrangement will reduce the number of continuing connected transactions between the Group and the Geely Holding Group and thus reduce the Group’s reliance on the Geely Holding Group,” it added. Geely Auto will also “continue to support the business development of Proton and will consider to provide further financial assistance pro-rata to its interest in Proton”.

Now, we’ve always seen Proton as Geely’s arm in Malaysia and ASEAN, and that’s because Proton – under Geely’s leadership – has always stated its aim to be number one in Malaysia and a top three player in ASEAN. And so, we’re assuming Geely products will enter our country and regional markets with Proton badges, just like how it is with Brunei.

But we’re now hearing that Geely is in talks to directly enter the Thailand market. While the carmaker flatly rejected the Reuters report, it is known that Thailand’s Board of Investment held talks with five major Chinese EV makers including Geely during a roadshow to China in April.

Geely transfers Proton shares to another subsidiary to reduce ‘connected transactions’ – what is this about?

Also, back in November 2021, we reported that Lynk & Co – a JV between Geely Auto and Volvo – will enter Malaysia. In the “Smart Geely 2025” strategic roadmap, the group said that “Lynk & Co will expand its global presence by entering Russia, Malaysia, Australia, and New Zealand among others,” without giving a timeline. Premium EV brand Zeekr might also be on the way here.

So, besides more straightforward accounting, could the Proton share transfer exercise from ZGH/GIHK to Linkstate/Geely Auto also remove the possibility of conflict of interest should Lynk & Co enter our market and rival Proton, so to speak? In legal terms, of course, as both left and right hands belong to ZGH and ultimately Li Shufu. Mere speculation at this point, of course.

How could Geely do this to Proton, some might ask. Wasn’t Proton supposed to be the Geely empire’s sole enforcer in the region? We will never truly know what Geely’s original plans for Proton were, or whether the difficulty of the task (an early declaration to be number one in Malaysia and top three in ASEAN sounded overambitious then, still is now) has altered the grand scheme for the ambitious Chinese company.

Anyway, Proton has excess capacity in its car and engine plants in Tanjung Malim and contract assembly for the wider Geely group can be a source of income.

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Danny Tan

Danny Tan loves driving as much as he loves a certain herbal meat soup, and sweet engine music as much as drum beats. He has been in the auto industry since 2006, previously filling the pages of two motoring magazines before joining this website. Enjoys detailing the experience more than the technical details.

 

Comments

  • Proton/Geely should be ashamed for their lack of action.

    x70 is due for a facelift.

    sparepart problem has it been resolved?

    Like or Dislike: Thumb up 22 Thumb down 15
    • Proton WarROOM Insider on Jun 04, 2023 at 10:41 am

      DO you need a China CEO to give lecture on inventory management for those monkeys?

      It means those monkeys are not qualified or incompetant or lazy goyang telor mentality

      Like or Dislike: Thumb up 16 Thumb down 3
  • Geely to Geely can not sell high. Other company sell to Proton can quote higher price. Be ready to buy more expensive rebadged Geely car.

    Like or Dislike: Thumb up 6 Thumb down 1
    • Sawadicarp....carp ....carp on Jun 03, 2023 at 6:26 pm

      Oh No…Geely is going north to the Detriot of Asia..Sawadicarp land.
      Make no mistake,P1 will end up being a step child.
      You need my engine n gearbox n platform..take it or leave it.Your market is too saturated n small.I need to go big,n expand into Thailand,who do not have a national car but have production in excess of 1.4 million units annually.
      So,Mr.DRB..wake up..shake up..remove the deadwood…no more honeymoon.

      Like or Dislike: Thumb up 12 Thumb down 1
  • todak on Jun 02, 2023 at 10:48 pm

    Didn’t Deng Xiaoping say, “No matter if it is a white cat or a black cat; as long as it can catch mice, it is a good cat.”?

    Like or Dislike: Thumb up 9 Thumb down 2
  • Tenggiling on Jun 02, 2023 at 11:46 pm

    Could be one day geli ditch Proton altogether because Proton is such a nuisance to them

    Like or Dislike: Thumb up 20 Thumb down 3
    • Raja Celup on Jun 03, 2023 at 9:37 pm

      “…Geely is in talks to directly enter the Thailand market.”

      vs.

      “… that’s because Proton – under Geely’s leadership – has always stated its aim to be number one in Malaysia and a top three player in ASEAN.”

      You see Geely clearly not confident with Proton brand name and self-contradict themselves.

      When fanboys claimed that for Philippines market better use Geely name (not Proton) there was due to LHD directly from China.

      Now Thailand RHD market also using Geely name but not Proton. Let’s see what hypocrite fanboys gonna cook up the nonsensical excuses next.

      Like or Dislike: Thumb up 17 Thumb down 1
      • caja relup on Jun 03, 2023 at 9:40 pm

        i think the real reason is bcos they think thailand needs the latest geely models to be competitive.

        proton badge is reserved for the hand me down crap, old x70, old x50, while the geely versions move on to the next gen

        Like or Dislike: Thumb up 12 Thumb down 4
    • Mad Armpit on Jun 06, 2023 at 4:28 pm

      Geely purchased (bailed) Proton in the past was so they can purchase Lotus. You think they really wanna buy Proton ke? Stop dreaming lah. They wanted Lotus and they got it now. Proton is just a pimple now, they want to get rid of.

      Like or Dislike: Thumb up 9 Thumb down 0
  • Yeahsure on Jun 03, 2023 at 12:25 am

    At this point , Just let Proton do the right-hand engineering of Geely and its associate’s products in Tanjung Malim to be sold locally and most importantly, to SEA…I’m not sure if its feasible to fund Proton for new models solely done by them…local market is too saturated,and the current economic outlook in the foreseeable future doesn’t look great so not much growth to be had locally for any substantial investment.
    Or it could just be a restructuring exercise for leveraging, enhancing credit ratings and being more robust in the financial market…

    Like or Dislike: Thumb up 11 Thumb down 3
  • Humph on Jun 03, 2023 at 12:32 am

    In the end, proton will just be the contract assembler for geely cars…

    Like or Dislike: Thumb up 28 Thumb down 2
  • hassan on Jun 03, 2023 at 6:16 am

    By putting as entity under 1 arm for business. Easier for any corporate exercise. Sell, combine brands or even regional branding. It happen in auto industry for years now.. in a way secretly holding to legacy national brand but within multinational. E.g Skoda, Seat.. something along that line.

    Like or Dislike: Thumb up 9 Thumb down 0
    • Xi Pheng on Jun 04, 2023 at 5:03 pm

      You’re aware, that certain VW models are entirely manufactured in SEAT plants and vise-versa?
      This not only goes for VW, but for Peugeot/Citroen/DS/Opel too, the DS3 for example is entirely manufactured at the Opel plant in Russelsheim.
      Nowadays, models are produced where there is enough production capacity, no matter what brand name is written at the gate of the plant.

      Like or Dislike: Thumb up 7 Thumb down 0
  • ROTI CANAI on Jun 03, 2023 at 10:31 am

    crony to crony

    Like or Dislike: Thumb up 0 Thumb down 6
  • Because we did not honour our obligation to asean free trade agreement by imposing tarrifs to cars assembled in other asean countries on account of protecting proton, , those countries retaliated by doing same to cars assembled in malaysia. So basically, geely cars made in tanjung malim will face tarrifs in other asean market, unless we abide fully with AFTA.
    Proton protectionism also deter or prohibit other manufacturers from opening plants in Malaysia, thus losing jobs and business opportunities for locals.
    Sabah and Sarawak are in fairly punished, as tgey have no benefit from proton or national cars, but must pay hefty prices for imported cars unlije brunei.
    If sabah and sarawak are exempted from proton protectionism, many manufacturers may set up plants there due to abundance of green hydro power.
    Thus is just one example if dr m economic policy that kills business dynamism in our country, and why our growth seems stagnant.

    Like or Dislike: Thumb up 26 Thumb down 2
  • Linkstate huh ? on Jun 03, 2023 at 1:29 pm

    Linkstate sound like a company used smuggled hi-tech goods into North Korea

    49% shares in Proton is FREE ? contraoff with Geely models ? Almost free.

    Proton used to sit next to LEE Sifu, now Proton sit 10 pole away from Lee Sifu.

    Like or Dislike: Thumb up 4 Thumb down 5
  • RepblikSawitsia on Jun 03, 2023 at 4:25 pm

    Haha kena main blkg dia nak masuk Thailand sendiri. Sementara di sini customer beli kononnya Volvo teknologi sambil tunggu alat ganti jatuh dari langit dari Sweden lol

    Like or Dislike: Thumb up 10 Thumb down 6
  • B40 Proton fapboi on Jun 03, 2023 at 4:26 pm

    Does it solve the spare part issue tho?

    Like or Dislike: Thumb up 3 Thumb down 3
  • Aeroheads on Jun 03, 2023 at 6:49 pm

    Feely is abandoning Proton.Habislah!

    Like or Dislike: Thumb up 8 Thumb down 2
  • Aeroheads on Jun 03, 2023 at 6:49 pm

    Geely is abandoning Proton.Habislah!

    Like or Dislike: Thumb up 6 Thumb down 3
  • Geely on Jun 03, 2023 at 8:10 pm

    Geely is distancing themselves from proton.
    From day one they never want have intention to develop proton brand anyway, only fools would believe their grand ambitions for proton.
    Now they treat proton like 3rd party to sell ol tech

    Like or Dislike: Thumb up 20 Thumb down 3
    • Raja Celup on Jun 03, 2023 at 9:30 pm

      Glad you can smell the intention. Geely only wanted to buy Lotus.

      When it’s done, just leave Proton forever as rebadge king, rebadge any crumbs given by Geely for higher price than mainland China price (give whatever excuse of RHD conversion costs craps etc) printing easy money here.

      Like or Dislike: Thumb up 16 Thumb down 1
  • Look clearly on Jun 04, 2023 at 12:38 pm

    Let’s be real here, Proton is nothing but a pawn to Geely.

    Like or Dislike: Thumb up 5 Thumb down 3
    • Bob Mal on Jun 05, 2023 at 3:40 pm

      That is true and Geely is only interested at Proton Pawn Queen which is Lotus.

      Like or Dislike: Thumb up 5 Thumb down 1
  • GengM on Jun 04, 2023 at 1:49 pm

    Geely also want to dump and exit rotten market Malaysia

    Like or Dislike: Thumb up 3 Thumb down 4
  • James KWON on Jun 05, 2023 at 8:11 am

    Geely is known for their mafia and backstabbing manners everywhere, buying shares of other OEMs under fake names like what they tried with Mercedes few years back which triggered German Gov to take legal action against them. treating their suppliers so bad that in China suppliers avoid them. now back stab proton to bring their outdated cars here under their own brand to go against BYD and GW. people buy their cars because they are Proton and without proton badge, they are doomed here. China OEMs cannot be trusted partners.

    Like or Dislike: Thumb up 11 Thumb down 9
  • Idgaf P1 on Jun 05, 2023 at 5:57 pm

    I bet Geely plan for proton is to sell geely cars, while proton can gtfo, so proton should change its name to ProtoG – perusahaan otomobil geely

    Like or Dislike: Thumb up 6 Thumb down 0
  • The current X50 X70 are not the latest version of the original cars, so I think Thailand wants the latest one to enter it’s market. Future of P1 seems not so bright.

    Like or Dislike: Thumb up 3 Thumb down 0
  • Mr Mar on Jun 06, 2023 at 9:37 am

    What Geely is doing are basically the same thing what Toyota did with Daihatsu and Perodua. Parent-child relationship. Chill guys

    Like or Dislike: Thumb up 0 Thumb down 4
    • Gomorrah on Jun 07, 2023 at 9:09 am

      Like this no need for the grandaddy gomen to keep protecting both of them lah

      Like or Dislike: Thumb up 0 Thumb down 0
  • need to use new pic or a generic pic. Mr Najib is no longer in the current scene yo! don’t harp on the past

    Like or Dislike: Thumb up 1 Thumb down 0
  • Ben Yap on Jun 06, 2023 at 1:27 pm

    geely must be discarding P1 due to too much government interference. not worth their investment and better backout before it’s too late.

    Like or Dislike: Thumb up 4 Thumb down 0
  • Samelorh on Jul 02, 2023 at 5:16 pm

    Alright, now it’s publicly listed in HKG exchange… DRB-Hicom can go buy back more of their proton stake. Introduce a sport division of R3 to revitalized the A and B Segment market with new models but can start 1st with turbo iriz under RM50k with carplay and android auto.

    Like or Dislike: Thumb up 0 Thumb down 1
  • Malaysians including gamen and all politicians/ ustaz should pujuk the geely, china and local towkays to increase investments and provide jobs for the country. Thanks

    Like or Dislike: Thumb up 0 Thumb down 0
  • Gamen should pujuk Geely lah.

    Like or Dislike: Thumb up 0 Thumb down 0
 

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