According to media reports, people familiar with the matter said that Malaysian DRB-Hicom Bhd. has agreed to sell nearly 50% of its shares in the loss-making automaker Proton Holdings to Zhejiang Geely Holding Group, the billionaire Li Shufu.
A person familiar with the request for anonymity said that DRB-Hicom's board of directors approved Geely's proposal on Tuesday. Baoteng also owns the British sports car manufacturer Lotus. DRB-Hicom said in the exchange announcement that the company's stock will be suspended from Wednesday, pending the announcement.
DRB-Hicom declined to comment. Geely’s representative did not immediately answer the reporter’s call during non-working hours. PSA Peugeot Citroen Group, which is competing with Geely, declined to comment.
Proton was established in 1983 by former Malaysian Prime Minister Mahathir Mohammad. The current controlling shareholder is DRB-Hicom Bhd., a Malaysian tycoon Syed Mokhtar Al-Bukhary. If the transaction is completed, it will mean that the long-term equity sale transaction of Baoteng is finally over. According to some preconditions of a government aid loan agreement, Proton must find an overseas partner. For Geely, the acquisition of Proton will be the largest acquisition after the acquisition of Swedish Volvo Cars from Ford Motor Company in 2010 for $1.5 billion.
The investment "will allow Geely to quickly enter the ASEAN market through a ready-made after-sales network, otherwise it will take several years," said Jochen Siebert, managing director of JSC Automotive Consulting in Singapore. "Li Shufu may know that the European, American, Japanese and Korean markets are not a good target for new players, and ASEAN may become an important market."
Proton has two plants in Malaysia, one in Shah Alam and the other in Tanjung Malim, with an annual capacity of 350,000 units. DRB-Hicom said in a statement in February that the new partners will help improve the utilization of the Tanjung Malim plant.
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