| 25-03-2008
Shanghai Automotive Industry Corp (SAIC), one of the country's largest automakers, said it will buy 50.32 percent of Shanghai Diesel Engine Corp, a subsidiary of Shanghai Electric. The deal is likely to boost SAIC's capabilities in the commercial vehicle sector, according to analysts. The deal, valued at 923.4 million yuan, is based on Shanghai Diesel's net assets. Shanghai Electric will no longer hold any stake in Shanghai Diesel after the transaction. The purchase is pending approval from authorities and the regulator.
"The deal should benefit both SAIC and Shanghai Diesel," said Zhang Xin, an analyst at Guotai Jun'an Securities. "SAIC can take a controlling stake in a major diesel engine manufacturer for much less than the cost of building a new engine manufacturing plant," he said. The deal will also enable Hong Kong-listed Shanghai Electric to focus on its core business of equipment manufacturing, Zhang said.
Founded in July 1947, Shanghai Diesel is a large-scale State-owned manufacturer of diesel engines, fuel-burning systems and diesel generator sets. The company employs over 4,000 staff and has net assets of 3.7 billion yuan. SAIC's plan is for Shanghai Diesel to focus on developing both vehicle and industrial engines, with significant enlargement in its production and sales capacity. SAIC will build Shanghai Diesel into the engine-manufacturing base for its commercial vehicle sector to facilitate commercial vehicle production with using its own patents.
Editor:Frederick Wei from Chinabuses.com
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