Media: Volkswagen plans to acquire 20% of Guoxuan Hi-Tech, China’s third largest battery manufacturer

Following the news that Guangzhou Automobile Group plans to invest in NIO, the new energy vehicle and battery industry chain has revealed news of blockbuster acquisitions. The protagonist this time is Guoxuan Hi-Tech, the third largest lithium battery giant in China. Media reports say Volkswagen plans to acquire a 20% stake in Guoxuan Hi-Tech as the latest step in the German automaker's accelerated expansion into China's electric vehicle sector. The deal could unfold through a discounted private equity placement in the coming weeks, sources said. Based on Guoxuan Hi-Tech's Thursday closing price of 17 yuan and a market value of US$2.8 billion, taking a 20% stake will mean that Volkswagen will use US$560 million in funds. Once the deal is completed, Volkswagen will become the second largest shareholder of Guoxuan Hi-Tech, second only to Zhuhai Guoxuan Trading Co., Ltd., owned by Guoxuan Hi-Tech founder Li Zhen, which currently holds 25%. It would also be the first time the German company has taken a direct stake in a Chinese battery manufacturer. The above report said that Volkswagen has long wanted to control a battery manufacturer to better manage its supply chain. Previously, Volkswagen set a goal of selling a total of 1.5 million new energy vehicles in the Chinese market by 2025, including hybrid vehicles. After the news of the investment came out, Guoxuan Hi-Tech surged in the afternoon, turned from falling to rising, and hit the daily limit in one fell swoop, with an amplitude of more than 13%. The stock price hit the highest level since March, and the total market value exceeded 21.4 billion yuan, corresponding to 20% of its shares. The market value is 4.28 billion yuan (approximately 623 million U.S. dollars). In response to the above news, the staff of Guoxuan Hi-Tech's Board Secretary's Office responded to Securities Times·e Company and stated that so far, no news about the above-mentioned equity acquisition has been received. Guoxuan Hi-Tech is the third largest company in China's lithium battery industry. In 2018, the company's power battery business revenue accounted for 89%, second only to CATL and BYD. The company's main business is the independent research and development, production and sales of power lithium-ion batteries (packs) for new energy vehicles. Its products include power lithium-ion battery pack products, single lithium-ion batteries (cells), power lithium battery cathode materials, etc. From January to September 2019, Guoxuan Hi-Tech achieved revenue of 5.15 billion yuan, a year-on-year increase of 25.8%; net profit attributable to the parent company was 580 million yuan, a year-on-year decrease of 12.3%; net profit after deducting non-attributed profits to the parent company was 410 million yuan, a year-on-year increase of 2 %.