Last week AutomotiveNews reported rumors that at least one Chinese automaker had made a bid for Fiat Chrysler (FCA) at a slight premium to the company’s prevailing market price though it was reported rejected. While it’s unclear whether an official bid was made, this morning Reuters is confirming that China’s Great Wall Motor Company has expressed interest in acquiring FCA, sending the company’s shares to a new 52-week high.
China’s Great Wall Motor Co Ltd is interested in bidding for Fiat Chrysler Automobiles (FCA), a company official said on Monday, confirming reports it is pursuing all or part of the owner of the Jeep and Ram truck brands.
“With respect to this case, we currently have an intention to acquire. We are interested in (FCA),” an official at Great Wall Motor’s press relations department told Reuters by phone. He declined to give his name and gave no further details.
In a statement, Fiat Chrysler said it had not been approached by Great Wall Motor, and was busy with implementing its current five-year business plan.
The industry publication cited a Great Wall spokesman confirming interest, but saying the Chinese automaker had not made a formal offer or met with FCA’s board.
Not surprisingly, FCA’s iconic Jeep brand, which Morgan Stanley figures is worth about 150% of FCA’s overall market value all by itself, is the crown jewel the Great Wall covets.
“Our strategic goal is to become the world’s largest SUV maker,” Automotive News quoted the spokesman as saying. “Acquiring Jeep, a global SUV brand, would enable us to achieve our goal sooner and better (than on our own).”
“Jeep is the most logical choice since (Great Wall) wants to be the largest SUV maker in the world,” said Yale Zhang, head of Shanghai-based consultancy Automotive Foresight.
Ram could be an option, but “the Jeep brand is recognized globally. I think Great Wall Motor is eyeing a global strategy, not just the United States,” Zhang added.
Jeep, which traces its roots to the iconic World War Two military vehicle, targets sales of 2 million vehicles in 2018, up from 1.4 million in 2016. Marchionne has said deliveries from the SUV brand could eventually rise to as many as 7 million a year as demand for sporty vehicles is set to keep rising.
In a recent note, Morgan Stanley estimated Jeep’s enterprise value at 23 billion euros ($27 billion) – nearly 150 percent of the whole of FCA’s market value.
Meanwhile, with a market value of almost $20 billion, an acquisition of FCA would be by far China’s largest overseas automotive industry deal – and possibly one of its largest ever overseas purchases – dwarfing Geely’s 2010 billion acquisition of Volvo cars.
And, of course, FCA shareholders are applauding the interest in pre-market trading.
Interest from China comes amid a push by the government to acquire international assets in order to gain further access to markets outside
A government directive dubbed China Outbound pushes Chinese businesses to acquire international assets from their industries and operate them “to make their mark,” much as Geely has done since acquiring Volvo in 2010. Bloomberg reported last week that Chinese companies plan to spend $1.5 trillion acquiring overseas companies over the next decade — a 70 percent increase from current levels.
“Right now, Chinese automakers enjoy the full support of the leadership in Beijing to go and make it happen,” Dunne said. “That’s something brand new, and it’s really picked up since 2015.”
Along with Volvo, Dunne pointed to Italian tire maker Pirelli and German robotics giant Kuka as Chinese acquisitions supported by the China Outbound policy.
Of course, given Trump’s focus on domestic auto production and intellectual property violations by China, something tells us this particular deal will be somewhat ‘complicated’ politically.