China’s BAIC buys into Daimler

Daimler’s Chinese joint-venture partner has bought a five per cent stake in the German car-maker to block Geely from sneaking in for a takeover.

The Beijing Automotive Group (BAIC) has reacted to the move last year by the founder and chairman of Zhejang Geely Holding, Li Shufu, to buy 9.69 per cent of Daimler.

BAIC is protecting itself, as well as Daimler, because it has been Daimler’s Chinese partner for more than two decades, with joint operations via Beijing Benz Automotive, which operates all of Mercedes-Benz’s factories in China. Daimler already owns a stake in BAIC’s Hong Kong-listed holding company.

Daimler shares jumped four per cent on the news yesterday, ironically increasing the paper value of the man BAIC’s move tried to stop.

Daimler shares have dropped by around 30 per cent since Shufu’s investment was revealed, following the installment of a new CEO in Ola Kallenius, fears of huge diesel-cheating fines and repeated profit warnings.

However, the losses haven’t hurt Shufu, who grew his investment as “collar” trades, meaning the banks take any profit above €90 a share and absorb any losses below €60. Daimler shares were trading at €46 yesterday.

Geely has already taken a 50 per cent stake in Daimler’s struggling city-car brand, smart, and cemented alliances in electric and autonomous car development with Daimler.

“This step reinforces our alignment with, and strong support for, Daimler’s management and strategy,” said BAIC chairman Heyi Xu.