Daimler AG turned an offer down from Geely, based in China, to acquire a stake of as much as 5% through discounted share placement, as the automaker based in Germany has been reluctant to see a dilution of existing shareholdings, sources knowledgeable about the talks said.
A stake that size would have a value of more than $4.5 billion at current prices in the market, said analysts, and even though the offer was declined by Daimler, Geely was told it could buy shares on the open market, said sources.
Carmakers in China are going through a flurry of different deals, as they are scrambling to increase production of plug-in hybrid and electric vehicles prior to the new, tough quotas that will be imposed by central government of Beijing that wants a reduction of urban smog and lower the reliance of the country on oil.
People who are knowledgeable of the thinking by Geely said the company remains keen on accessing the electric car battery technology of Daimler and wanted to establish a joint venture to develop and make electric cars in Wuhan, the Hubei province capital.
Geely, which is the owner of Volvo, the Sweden based carmaker, remains hopeful it will secure a deal of some form over the upcoming weeks.
Both automakers met recently in Beijing at the request of Geely. At the meeting, Geely formally referred to as Zhejiang Geely Holding Group, offered to acquire a share of between 3% and 5% if Daimler issued new shares for a discount, said sources.
It was not clear at the time what the discount was to acquire the shares that Geely requested or if Geely had any interest in buying shares on the open market.
Shares of Daimler were up by 1% in early trading on Wednesday, which was in line with a broader market.
Geely, which is value in the market at $32 billion, is China’s leading domestic brand with a market share of 5%.
A 5% stake would establish it as the third-largest Daimler shareholder behind Kuwait Investment Authority followed by BlackRock, who have 6.8% and 6% respectively.
However, Daimler has a joint venture that is long established with BAIC Motor Corp, a carmaker based in China, which a Daimler spokesperson calls its most important Chinese partner.
This month Daimler announced its plans of investing 5 billion yuan or $757 million in the production of electric batteries and vehicles with BAIC. It is also in another venture with BYD, an automaker in China that is backed by billionaire investor Warren Buffett.