Auto supplier Ningbo Jifeng Auto Parts (603997.SS) has made an approach to buy German rival Grammer (GMMG.DE) at a time when Chinese takeovers face increased scrutiny from German and European authorities eager to protect domestic know-how.
Ningbo’s indicative offer, disclosed early on Tuesday, values Grammer at around 772 million euros ($893 million), including dividends, and sent Grammer shares up 20.4 percent to 61.75 euros, above the Ningbo offer price of 61.25 per share.
The offer may result in a voluntary public takeover offer, and will test Germany’s willingness to tolerate Chinese takeovers, following an unsolicited approach by Geely (0175.HK) chairman Li Shufu to secure a $9 billion stake in Daimler (DAIGn.DE).Ningbo’s offer comes as European lawmakers finalize a European proposal for greater scrutiny of investments made with state influence or aimed at transferring key technologies to a third country, a clear reference to some Chinese state-led firms that have bought European rivals.It also comes less than a week after German Chancellor Angela Merkel, during a trip to China, called on the world’s No.2 economy to open up key industries to outside markets, demanding greater reciprocity between both regions when it comes to takeovers and market access to technologies.
Grammer on Tuesday said that Ningbo Jifeng, already a major shareholder, was in “advanced negotiations” with the firm, adding it was uncertain whether negotiations would be concluded successfully and a takeover offer would be launched.
The German company added it was “assessing strategic options in the best interest of the company”.
Sources familiar with the matter said that Ningbo Jifeng is offering to guarantee jobs at Grammer for 7-1/2 years as part of the proposed transaction, adding the Chinese group was currently not aiming for a domination agreement.Ningbo Jifeng raised its stake in Grammer in October last year to 25.51 percent. Sources told Reuters around that time the Chinese firm wanted to increase its stake amid a power struggle with a rival shareholder, Bosnia’s Hastor family.
Grammer’s management has generally welcomed the attention of Ningbo Jifeng, another supplier of vehicle interior components, as a potential “white knight” in its conflict with Hastor.
“We would view such a bid as positive as it offers the Hastor group a good opportunity to exit,” DZ Bank analyst Michael Punzet wrote in a note, keeping a “hold” rating on the stock.
