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FAW mulls IPO, set to acquire Brilliance Auto

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FAW mulls IPO, set to acquire Brilliance Auto

August 18, 2008

Shanghai, August 18 ( FAW Group, a booming Chinese auto-making giant who is seeking media publicity for its IPO plans, desires to buy out other carmakers, and now its attention has turned to neighboring Brilliance Auto, a Chinese partner of BMW, said today.

FAW insiders said that the corporation had a big profit growth in 2007 and its sales are expected to reach a new high this year amid the general slump in the Chinese auto market. Building upon this unique competitiveness and strength, FAW has decided to boost its media hype and IPO plans before acquiring some carmakers whose operations and prospects are not optimistic.

Brilliance Auto, located in Shenyang, capital of Northeast China's Liaoning province, has fallen prey to the further expansion of FAW Group headquartered in the neighboring Jilin province's Changchun city. The giant FAW aims to sell one million own-brand homemade vehicles, while Brilliance Auto currently has only annual sales of 300,000 vehicles of Brilliance Jinbei, Brilliance Zhonghua and Brilliance BMW brands combined together.

The acquisition of Brilliance Auto will greatly boost FAW's capacity and sales, and will add an important division to FAW. It is not easy for FAW to buy out and use the three Brilliance brands, but its IPO plan and the strategy of building up Chinese brands are likely to be well received by both the media and industry.
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I don't undestand why is FAW even considering buying Brilliance. Don't they already have enough brands? And Haima, Besturn and Honqi are all expanding their product lineups.
FAW purchased 51% of Brilliance's parent Jinbei in 1995 only to sell it again in 2000. These 2 state-owned enterprises are geographically close and probably share many of the same suppliers.
The Toyota connections of both FAW and Brilliance would also make a nice match.
FAW may also have an interest in helping Brilliance's foreign partner BMW expand.
Brilliance Auto denies possible acquiring by FAW

August 20, 2008 - An earlier report said that an insider of FAW said the company is set to acquire Brilliance Auto, a Chinese partner of BMW, but an executive of Brilliance denied this report yesterday, adding that Brilliance Auto has no restructuring plans in the near future, according to the Beijing News.

"It is impossible for FAW to buy out Brilliance Auto," said the Brilliance executive to the reporter. "Although FAW has the desire to acquire it, Brilliance Auto has worked out its own mid- to long-term targets for product development and sales, and therefore it has no plans for restructuring in the near future." In fact, Brilliance turned losses to profits last year by doubling its sales and now it is carrying out its new "five-year plan."

However, sources from FAW insisted that FAW's top management are very interested in buying Brilliance and its new general manager Xu Jianyi, with the support of FAW's most top executives, is actively pushing forward this plan. But the cooperation has to resolve the issue of Brilliance BMW, a joint venture which will soon start construction of its second production facility. It will be awkward for BMW and its major rival Audi, a partner of FAW, to be produced under the same roof in China.

An industry analyst said that giant FAW aims to sell one million own-brand homemade vehicles in 2010, while Brilliance Auto currently has annual sales of 300,000 vehicles of Brilliance Jinbei, Brilliance Zhonghua and Brilliance BMW brands combined together. The acquisition of Brilliance Auto, if possible, will greatly boost FAW's capacity and sales, and will add an important division to FAW.
Brilliance says had approach but no FAW talks

August 28, 2008

Brilliance Auto, BMW's partner in China, has been approached about a possible takeover but has not discussed a merger with larger rival FAW Group, as reported in domestic media, its chairman said on Wednesday.

"Neither I nor any other Brilliance executive has up to now had any discussions with FAW about a merger," a spokeswoman quoted Brilliance Chairman Qi Yumin as saying at a company event.

Chinese media reported recently that FAW was in talks to take over Brilliance Jinbei, which makes the group's self-developed Zhonghua sedans, known as the BS6 and BS4 overseas, with an eye to eventually buying the parent group.

Qi said, however, that he would not oppose a takeover deal if it could help the group to shore up its own vehicle brands, the spokeswoman said.

"We have laid out our development scheme and we are working hard on it," he was quoted as saying.

A takeover of Brilliance would mark another major step toward consolidating China's fragmented auto industry, after market leader SAIC Motor's $286 million acquisition of Nanjing Automobile Group late last year.

Beijing has been encouraging mergers and acquisitions among the industry's more than 100 players, aiming to create a few national champions able to compete with global giants at home and overseas.

Brilliance, parent of Brilliance China Automotive Holdings, secured a deal in 2006 to sell 158,000 sedans to Europe over the next five years.

But it made headlines last year when its BS6 mid-sized sedan received a rating of just one star out of five in a crash test by Germany's ADAC auto club.

Another crash test several months later achieved results equivalent to three stars on the official test, Brilliance has said.

In July, the company said it would begin shipments to Germany of its mid-sized BS4 sedans, which also received the equivalent of a three-star rating in a crash test from an official test house in Europe.

The automaker has also set an ambitious target to more than triple its vehicle sales to 1 million by 2012 from 300,000 in 2007.
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it would be in Brilliance's best interest if FAW acquired them. We need to see more automakers in China merge to bigger powerhouses to compete internationally
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