DaimlerChrysler to buy stake in China's Foton

SHANGHAI, Nov 30, 2006; Reuters reported that DaimlerChrysler will buy 24 percent of Chinese truck and pickup makerBeiqi Foton Motor Co. for 817 million yuan ($104 million), the Chinese company said on Thursday.

Foton will issue 297 million new A-shares to the world's fifth-largest car maker, equivalent to 24 percent of its enlarged capital, at 2.75 yuan per share. That represents a discount of 24 percent to the company's last traded price on the Shanghai Stock Exchange.

The Chinese company will also issue 129.11 million new shares to its state parent at the same price.

The deal, which needs approval by Chinese regulators and Foton shareholders, will raise 1.17 billion yuan for Foton, which will use the money to upgrade technology and supplement working capital, the company said.

Beiqi Foton posted a net loss of 45.91 million yuan on sales of 9.79 billion yuan in the first half of this year. Sales were up 17 percent from a year earlier.

Trading of Foton's A-shares has been suspended since Nov. 21. They have jumped more than 125 percent so far this year, outperforming a 75 percent gain of the benchmark Shanghai stock index.

China's commercial vehicle market is expected to sustain double-digit growth in coming years while exports expand, consultancy KPMG said recently, despite shrinking in 2005 when Beijing imposed controls on construction and investment.

About 2.5 million commercial vehicles were sold in China in 2005, down slightly from 2.6 million in 2004. But in the first half of 2006, sales amounted to 1.5 million, on track to surpass last year's total.

Although many Chinese automakers have partnered with foreign manufacturers -- from BMW A.G. to Volvo -- in joint ventures, homegrown manufacturers still control the lion's share of the domestic market.

Extensive road projects, increased urbanisation, and heavy reliance on public transportation in the world's fourth-largest economy should drive the industry, KPMG said in a report on China's commercial vehicles industry, a category that excludes sales of consumer passenger vehicles.