China’s biggest automaker SAIC Motor is hammering out a deal for a potential takeover of Car Inc, the Hong Kong-listed car rental company which had shared a chairman with scandal-ridden Luckin Coffee.

Why it matters: If the deal proceeds, Luckin founder Charles Lu and his family will receive up to HK$1.37 billion (around $177 million) likely to be put toward easing the company’s liquidity crisis. The troubled coffee chain now faces a batch of lawsuits from both Chinese and overseas investors seeking to wind down his assets.

  • The Investment would also help the car rental platform recover more quickly from the Covid-19 outbreak, while helping SAIC expand its footprint in the mobility market, analysts from China International Capital Corporation (CICC) said Friday.
  • Shares of Car Inc surged 12.25% to HK$2.84 ($0.36) on Friday afternoon.

Details: SAIC has reached a non-binding agreement with Ucar, parent company of Car Inc, and Amber Gem Holding, its third-largest shareholder, to secure up to 28.92% of the car rental firm’s shares, the automaker said Thursday in a filing (in Chinese).

  • The Chinese partner to Volkswagen and GM plans to pay HK$3.1 a share, a 33% premium over Car Inc’s closing price on Wednesday, for around 443 million shares from Ucar and 170 million shares from Amber Gem.
  • The state-owned automaker, controlled by country’s state asset regulator, expects the deal will cost a maximum of HK$1.92 billion, taking up less than 1% of its total assets. The transaction is subject to government approval.
  • Car Inc, like the rest of China’s mobility companies, had been hit hard by the pandemic. Its first quarter revenue sank 28.3% year on year to around RMB 1.33 billion ($188 million). It recorded a net loss of RMB 188 million in the quarter versus a net profit of RMB 390 million the same period a year earlier.
  • SAIC will become the company’s biggest shareholder if the deal is completed, followed by Chinese tech giant Lenovo with a 26.6% stake. Ucar, a Shenzhen-listed auto service group formed by Luckin founder Charles Lu, will no longer be a shareholder.
  • A partnership with the leader in the car rental market would help accelerate SAIC’s transition from a traditional automaker into an integrated mobility product and services provider, the Chinese auto giant said in the filing.

Context: The potential transaction also means an end to the takeover talks between Daimler’s Chinese partner BAIC and Lu with his auto service group.

  • Car Inc in late May revealed BAIC’s intent to buy 21.3% of the company. However, SAIC swooped in and extended an offer while BAIC were still conducting its due diligence, Caixin reported citing a person close to the deal (in Chinese).

Jill Shen

Jill Shen is Shanghai-based technology reporter. She covers Chinese mobility, autonomous vehicles, and electric cars. Connect with her via e-mail: jill.shen@technode.com or Twitter: @yushan_shen