Cars

SAIC agrees in principle to take 1% of GM IPO

(Agencies)
Updated: 2010-11-15 16:18

DETROIT/NEW YORK - China's SAIC Motor Corp Ltd has agreed to take a stake in General Motors Co, four people familiar with the matter said. But the deal still needs the approval of the Chinese government.

The potential investment from SAIC is part of a surge in investor interest in GM that is expected to push the pricing of its shares to $29 or above in the US automaker's initial public offering, one of the sources said.

Another source said SAIC, GM's partner in China, would take a stake of around 1 percent in the automaker, majority owned by the US Treasury after a bailout last year.

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An investment of just over $500 million would represent about 1 percent of the common stock in GM if the IPO prices at the high end of the proposed range this week.

Apart from further cementing their tie-up in China, SAIC was also taking part in the deal to gain access to GM's sales networks outside China, including in Europe, one source told Reuters.

SAIC Chairman Hu Maoyuan had said previously the automaker will revive production at its UK plant and make MG cars available in Britain and the rest of the European Union in 2011 as part of its move to revive the acquired British marquee.

"That would be a great help for the Chinese automaker which had aimed to start selling its MG cars in Europe next year," said another industry source.

SAIC's shares traded in Shanghai rose 1.1 percent to 18.2 yuan, outperforming a 0.5 percent fall in the benchmark index.

China's government would have to approve the SAIC investment before Wednesday for it to go forward as part of GM's IPO, the sources said.

GM had no comment, while SAIC representatives declined to comment. China's commerce ministry could not be reached immediately.

Talks between the two sides have been under way for more than two months and have covered a range of topics including the deepened cooperation in the development of electric vehicles and support for SAIC's ambitions to move beyond the China market, sources have said.