Saab Auto Sets Sale to Panda and Youngman
Published on October 29, 2011 by Tycho de Feijter
STOCKHOLM—Swedish Automobile NV, the owner of Saab Automobile, said Friday it agreed to sell the stricken car maker to Chinese companies Pang Da Automobile Trade Co. and Zhejiang Youngman Lotus Automobile Co. for €100 million ($141.9 million), conceding defeat in a two-year struggle to turn the company around after decades of losses.
Saab has been operating under creditor protection while trying to restructure its operations for a second time since being put up for sale by former owner General Motors Co. Production has been suspended since April amid a lack of sufficient funds to pay suppliers and employees.
A memorandum of understanding signed between Swedish Automobile and the two Chinese investors is valid until Nov. 15 of this year, provided creditors approve Saab’s continued reorganization process in a meeting expected on Monday.
If successful, the deal would be only the second by a Chinese buyer for a foreign car brand, after Zhejiang Geely Holding Group Co. acquired Volvo Cars from Ford Motor Co. last year. Chinese auto makers have enjoyed strong growth at home but have been eyeing Western markets, where they hope to sell premium vehicles at higher margins, gain access to more advanced technology and broaden their portfolios.
Chairman and chief executive of Saab, Victor Muller, said on Friday he was relieved that the “seven-month ordeal” regarding the company’s future was finally over.
“The only thing that counts is that we’ve brought the company into a safe haven,” said Mr. Muller, whose continued role in the company is now “subject to discussion.”
Previously a niche sports car maker called Spyker Cars NV, Swedish Automobile bought Saab from GM in February 2010 for $74 million after several other suitors dropped out, and said it would make Saab profitable again by 2012. But despite receiving a loan from the European Investment Bank that was guaranteed by the Swedish state, Saab ran out of cash less than a year into its new ownership, forcing suppliers to withhold component deliveries, halting output from its Trollhattan plant and pushing the car maker to seek court protection from its creditors as it restructured.
In what was seen as a last ditch effort to stay afloat, Swedish Automobile in July agreed with Youngman and Pang Da to sell a 54% stake to the two for €245 million, though the deal fell apart two weeks ago after Mr. Muller declined an offer from Youngman and Pang Da to buy the whole company and its U.K. dealership.
In Friday’s revised deal, Youngman will take a 60% stake in Saab while Pang Da will take 40%, with the two companies investing more than the €245 million initially agreed, Mr. Muller said.
The deal is subject approval by Chinese authorities, as well as GM, the European Investment Bank and the Swedish state, but the road has been tough for other Chinese auto makers looking to buy up foreign brands.
Sichuan Tengzhong Heavy Industrial Machinery Co. ended a months-long effort that began in 2009 to acquire GM’s Hummer brand after Chinese regulators missed several deadlines to approve the bid. SAIC Motor Corp. purchased roughly half of South Korea’s Ssangyong Motor Co. in 2004 but sold all of its stake last year after Ssangyong’s business slumped in the wake of the financial crisis of 2008.
A Pang Da spokesman declined to answer questions Friday afternoon, and Youngman didn’t return calls. Earlier Friday, Pang Da board secretary Wang Yin told The Wall Street Journal that talks were progressing to acquire all of the company, but it wasn’t clear when they might be concluded.
Chinese regulators have in recent months focused on consolidating China’s diffuse auto industry rather than expanding it. Auto-industry officials have said in recent months that regulators have been slow to approve applications for expansions and other corporate transactions.