Chinese News in a Week - Week 50 of 2007 (11th - 17th December)

[andy]

Chinese News in a Week - Week 50 of 2007 (11th - 17th December)

1 – More on the SAIC-NAC agreement: possibly 8% of SAIC shares for NAC assets?

According to informed sources, SAIC can come to an agreement with NAC on the acquisition of all the assets of NAC by the end of this month at the earliest.

NAC spokesman Liu Ningsheng had this to say during an interview, "We may possibly sign the agreement in Beijing in this month; and the company's plan to open a plant at Oklahoma, United State has been put aside, waiting for the merger to be finished."

The assets of NAC are said to be worth 2.6 billion yuan (equivalent to 175 million pounds), the assets mainly consist of the car-making business (passenger vehicles and commercial vehicles), car parts production, car servicing and sales. The car-making business includes NAC MG, Nanjing-Iveco, Nanjing-Fiat, Yuejin light trucks and Wuxi Soyat.

There are speculations that NAC can receive 5% to 8% of SAIC shares in exchange of the assets of NAC, but no more than 10%. Based on the closing share price of ¥24.47 on December 14th, the share value of 10% is worth 16 billion yuan (equivalent to 1 billion pounds).

Source: http://www.caijing.com.cn/home/cjkx/...12/41647.shtml
Source: http://news.xinhuanet.com/auto/2007-...nt_7269871.htm

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[andy]

Nothing really new this week, but it is nice to hear NAC to say something about the American venture.

[streetrover]

Looks like a few things might make the news once all the tie ups are complete.

[JohnSwitzer]

The assets of NAC are said to be worth 2.6 billion yuan (equivalent to 175 million pounds), the assets mainly consist of the car-making business (passenger vehicles and commercial vehicles), car parts production, car servicing and sales. The car-making business includes NAC MG, Nanjing-Iveco, Nanjing-Fiat, Yuejin light trucks and Wuxi Soyat.

On that basis, perhaps PWC didn't do too badly after all in what it secured for MGR.

Regards

John

[doos]

175 million pounds for all the assets of NAC MG, Nanjing-Iveco etc. is this correct

Surely it is all worth far more!

[streetrover]

Valuations are based on solid assets, not potential. This is not a normal acquisition or merger where buyer demand or multiple bidders might play a part.

[patpending]

Originally Posted by JohnSwitzer

The assets of NAC are said to be worth 2.6 billion yuan (equivalent to 175 million pounds), the assets mainly consist of the car-making business (passenger vehicles and commercial vehicles), car parts production, car servicing and sales. The car-making business includes NAC MG, Nanjing-Iveco, Nanjing-Fiat, Yuejin light trucks and Wuxi Soyat.

On that basis, perhaps PWC didn't do too badly after all in what it secured for MGR.

Regards

John

My thoughts too, purely the cash paid for MGR plus the cost of organising the move and building the factory - plus having to expense to MG over 200 admin people on the payroll transferred from Nanjing FIAT - would seem to be pretty close to 100% or more of the value of the whole company, before you even consider the effect of top management concentrating on MG and things like Longbridge and Ardmore. ("This is a Wang of confusion" as Genesis sang). Wang Haoliang (Mr. Wang no.1) was often effectively quoted as saying that NAC were betting the farm on MG. I wonder if NAC lost the bet and bought the farm?

Did they lose an important supporter in the Party?

Wonder where the cash came from? The banks? Don't think a UK bank would lend you 50% or more of your net asset value to do anything, let alone move the contents of a failed factory round the world, put them in a new factory and start making cars. You wouldn't even be able to borrow 27 1/2p for a tin of Humbrol for a lick of paint!

I know that Soviet accounting had no idea of "profit" or "fair value", only of "production". A factory that churned out 100,000 rusty tractors a year counted as 10 times more valuable than an operation making 10,000 shiny new Lamborghini tractors! I wonder if NAC's emphasis on quality has, perversely, reduced their Chinese-basis non-market value?

[streetrover]

My worth:

The Chinese government waited to see if NAC could get the 'existing' models going and with enough competancy and quality to keep NAC management in place pending a merger/takeover. If NAC had failed, they would have seen MG swallowed up anyhow.

I don't think they were keen on NAC going for too much private equity to fund the new models, or told them to hold off on inwards investment as merger was on the cards. Maybe the money NAC went after didn't materialise, and the government realised NAC had no future alone?

They waited to see how SAIC developed their existing/new IP too, and realised that bringing NAC-MG in-house would allow greater use of things like Austin and clear up some of the IP ownership issues. A merger would also be useful if there were any question marks over SAIC's development competancy (as has been rumoured re: engines), if NAC passed the existing IP developments test (which i think they did).