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JAC to seek new investment

HEFEI, Anhui – Jianghuai Automobile Co., Ltd. (JAC) is considering injecting fresh blood into the company since it’s about to complete its ownership restructuring in 2008.
 
Investments from auto-related groups are most welcomed, according to Wang Min, secretary of JAC’s board. Multiple investors are interested in the partnership, including the Blackstone Group.
 
JAC has been undergoing ownership restructuring since May last year. It’s a common practice for State-owned enterprises to divide the restructuring into two steps: first, allocate around 30 percent of company shares to company staff (usually senior managerial staff); and second, bring in outside capital, turning solely State-owned companies into multi-party share-holding companies.
 
For instance, State-owned Chery Automobile Co., Ltd. (Chery) revealed earlier that it will complete the company’s ownership restructuring by the end of this year, with 37.5 percent of its shares transferred to the company’s managerial staff. Chery may also launch its initial public offering (IPO) in the mainland’s A-share market when the restructuring is finished, according to previous media reports.
 
As JAC is approaching the end of the first step, it’s now warming up for the second. It has met multiple candidates yet has’t made a choice, according to Wang. Preferred candidates are those who share JAC’s business ethos and comply with Chinese auto industry policies, said Wang.
 
JAC attaches great emphasis on its future partner’s background. “Sure we are inclined to choose partners with auto related backgrounds,” said Wang. But he declined to disclose the shareholding ratio between the State and the new partner. “It will definitely be a State-owned shareholding company,” added Wang.
 
Previously, local media reported that the U.S. private equity and investment management firm the Blackstone Group paid a visit to JAC, which aroused wide speculations of a possible new partnership.
 
Yet Wang claimed it was a routine visit organized by the local government. Multiple visitors, including the Blackstone Group, visited JAC as well as other companies.
 
But senior industry analyst Zhong Shi predicts that chances are Blackstone will become JAC’s new partner, since Blackstone is seeking promising OEMs as investment targets and in the meantime JAC is also in search of deep-pocketed partners to finance the company’s future development.
 
Blackstone is a leading global alternative asset manager and provider of financial advisory services with an approximate total of $91.8 billion worth of assets under its management, as of June 30, 2007.
 
It recently poured $600 million into the China National BlueStar (Group) Corporation (BlueStar), and acquired a 20 percent stake in BlueStar, a leading manufacturer of new material and special chemical products, which is also foraying into the auto industry.
 
Blackstone has acquired two auto parts suppliers so far and fits the profile of JAC’s future partner perfectly.
 
Both Chery and JAC are headquartered in eastern China’s Anhui Province. The Anhui provincial government has been relentlessly pushing for the ownership restructuring of JAC and Chery.  
 
“The ownership restructuring of JAC and Chery has been a top priority of the Anhui government,” a managerial staff with Chery revealed earlier. “The pattern and schedule of the two companies’ restructuring programs are roughly in accordance with each other.”

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