Denway boosts stake in Honda venture
(Shenzhen Daily/Agencies)
Updated: 2005-01-05 13:48

DENWAY Motors Ltd. said Tuesday it would purchase from its parent company the 5 percent it did not already own of Guangzhou Denway Enterprise Development Co., thereby indirectly raising its stake in a joint venture with Honda Motor Co.

The move will give the Hong Kong-listed company even greater exposure to the mainland’s automobile market, though at a time when once sky-high sales growth is slowing.

Passenger car sales were up 16 percent during the January-November period last year, compared with a surge of around 75 percent last year, and automakers’ earnings have been hit as they scramble to clear out excess inventory through price cuts.

BEIJING, Jan. 5 -- Denway will pay HK$996.2 million for the 5 percent stake, with HK$789.4 million of that paid in cash and the remainder by the placement of 73.8 million new shares at a price of HK$2.803 each.

The seller is City Achieve Investments Ltd., a company indirectly controlled by Denway’s ultimate owner, Guangzhou Automobile Industry Group Co. City Achieve will hold 0.99 percent of Denway after the share placement.

“The board is of the view that the acquisition...represents an excellent opportunity for the group to strengthen its direct and indirect interests in its core automobiles manufacturing arm,” Denway’s managing director, Zhang Baoqing, said in a statement.

After the purchase is completed, Denway will own 100 percent of its principal operating unit, Guangzhou Denway, which in turn owns 50 percent of Guangzhou Honda Automobile Co., a joint venture that sold 117,048 vehicles last year, 98 percent more than in the previous year.

Guangzhou Denway also owns interests in sales and trading companies for Honda vehicles in Guangzhou.

Zhang said Denway’s increased exposure to the Honda joint venture would likely increase its profits, though he didn’t provide a precise estimate.

The deal is a connected transaction and is therefore subject to the approval of minority shareholders.

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