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How Geely sought to acquire FCA
Luca Ciferri | 2018/3/6

GENEVA -- The most-watched name in the global automotive industry, Chinese billionaire Li Shufu, won't attend the auto show here this week.

The founder and chairman of privately owned automaker Zhejiang Geely Holding Group Co., who last month drew a harsh spotlight in Germany by becoming Daimler's largest shareholder, will be keeping his usual distance from the auto world's biggest stages.

Li rarely attends auto shows outside China. His public appearances in Europe -- with a contingent of Chinese politicians, entrepreneurs and media -- are typically at events tied to his growing list of European brands.

He was in Berlin on Oct. 20, 2016, to unveil Lynk & CO, a near-premium brand co-developed by Geely with Volvo Car, which Li had acquired from Ford Motor Co. six years earlier.

He was in England on March 22, 2017, to open the London Taxi Co.'s new facility near Coventry. The 2013 purchase of the legendary black cab maker marked Li's second acquisition in Europe.

And he's planning to attend a Lynk & CO event this month in Amsterdam, says a spokesman in Europe, who also confirmed Li's decision to skip Geneva. In Amsterdam, Li is expected to announce that Volvo's plant in Ghent, Belgium, will build Lynk & CO cars for Europe.

And in the midst of such public appearances, there was a trip to Europe last spring that could have dramatically reshaped the global auto industry -- and Li's expanding role in it.

Flight to Turin


In May, Li flew to Turin in a Geely-owned jet for a private meeting with John Elkann, the Agnelli family heir who chairs Exor, the holding company that controls Fiat Chrysler Automobiles, said people involved in the trip and the talks. They asked not to be identified, as the meeting wasn't made public.

A Geely spokesman in China said "it was normal to have business contacts" but declined further comment.

An FCA spokesman deferred any comment to Exor. An Exor spokesman declined to comment.

Li was scouting for options to expand Geely outside China.

FCA is the third-largest automaker in the U.S., the fourth-largest in Europe, a major player in Latin America -- and weak in Asia. It could have been a perfect fit for Geely, and not only geographically.

In a world that is turning to SUVs and premium brands, buying FCA would have given Geely an iconic U.S. marque synonymous with SUV across the world -- Jeep. Geely also would have received such storied sporty brands as Maserati and Alfa Romeo.

On top of that, FCA would have added 4.7 million annual vehicle sales -- under the names Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Fiat Professional, Jeep, Lancia, Ram and Maserati -- in more than 150 markets to the growing Geely empire. FCA has 231,000 workers operating in 162 manufacturing facilities and 87 r&d centers, company data show.

In China, Geely's sales were up 45 percent in January, making it the second best-selling automaker. It was No. 5 overall for production, but that ranking includes joint ventures with foreign automakers. Among domestic automakers, it was No. 1.

Last summer, amid Automotive News reports of Chinese suitors, FCA said it had had no contact with Geely. Technically, that was accurate, as Li was not talking with FCA but with its controlling shareholder. Exor owned 29 percent of FCA shares and 42 percent of voting rights as of Jan. 10 this year, Exor data show.

Differences 

After Li's trip to Turin in May, representatives of the suitor and potential seller held discussions in private meetings in London in July and August, three sources told Automotive News Europe.

The initial offer valued FCA at $20 billion. It constituted Geely purchasing Exor's stake as well as a public tender for the 71 percent of shares held by other investors. The offer was rejected.

Geely's emissaries then raised their offer to $22 billion, with no success.

Two sources with direct ties to the discussions gave different views on why a deal didn't happen.

The first source, speaking under condition of anonymity, said the sweetened $22 billion offer was deemed too low. Exor was convinced it could have extracted more value by selling FCA in parts.

Under that scenario, one step would have involved the spinoff or sale of FCA's Magneti Marelli parts business, a move FCA CEO Sergio Marchionne still wants to pull off this year.

Another step would have combined Alfa Romeo and Maserati into a separate company to be sold. A third would have seen the Jeep and Ram brands being sold as a package. Finally, the remaining European, U.S. and Latin American businesses would have been offered to a fourth buyer, possibly a Chinese group.

The second source said FCA was open to accepting a $22 billion deal if Alfa and Maserati were excluded. Geely rejected that idea.

The discussions were over by the end of August.

Not an easy surrender

Li, 54, the son of a farmer from China's eastern Zhejiang province, has been seen as a Chinese remake of Henry Ford, a century later.

He founded Zhejiang Geely Holding Group in 1986, which was at the time focused on refrigerators. He moved into motorbike manufacturing in the 1990s before turning to autos in 1997.

The purchases of Volvo and London Taxi and the creation of Lynk & CO followed the Great Recession.

Last year, he won control of British sports car maker Lotus, acquired a 49.9 percent stake in Malaysian automaker Proton and spent $3.3 billion to become the biggest shareholder of Volvo, the world's second-largest truckmaker.

Then, this year, came the stake in Daimler.

Reports surfaced in late November that Daimler had rebuffed advances from Li, who reportedly was seeking to acquire about 5 to 7 percent. Then, last month, Li disclosed that after a series of stock market purchases, he had acquired a 9.7 percent holding in Daimler through the Geely Group, which is owned by Li and managed by Zhejiang Geely Holding.

Since moving on from FCA last summer, Li has spent more than $12.5 billion in automotive acquisitions. Considering that he was ready to buy FCA for $22 billion, he could have nearly $10 billion handy for further acquisitions.

Getting financial resources seems to be no obstacle. He plays an active political role in China and is a regular delegate to the Chinese People's Political Consultative Conference, a largely ceremonial political advisory body.

His political savvy may have helped get the Daimler investment done smoothly, analysts and local media said, especially amid a crackdown by China on overseas deals.

In announcing the Daimler deal, China's official Xinhua news agency said Geely reflected a wider "bullish" push by local automakers overseas and the overall "rising strength of Chinese automakers."

Li's business ambitions also appear to align with those of China's government, which wants to strengthen the country's high-tech expertise and leapfrog global rivals by becoming a leader in electric vehicles and autonomous driving.

But, for now at least, Li's ambition won't include FCA.

Paul McVeigh, Douglas A. Bolduc, Christiaan Hetzner, Andrea Malan, Yang Jian, Bloomberg and Reuters contributed to this report.



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