Brilliance China To Buy Out Government Share In Its BMW Venture

HONG KONG December 16, 2003; Andrew Batson writing for Dow Jones reported that Brilliance China Automotive Holdings Ltd. said Wednesday it has agreed to buy out a government entity's stake in one of its subsidiaries, a move which will increase the company's shareholding in its joint venture with German luxury carmaker Bayerische Motoren Werke AG .

After the purchase, which will cost Brilliance China 135 million yuan, the company's effective interest in the joint venture will increase to 49%, from 44.6%, it said in a legal notice. This "will enable the company to further increase its share of benefits from the business of the joint venture," the notice said.

BMW owns 50% of the venture, and another government-linked company owns the remaining 1%. The joint venture, known as BMW Brilliance Automotive Ltd., manufactures BMW 3-series and 5-series luxury cars for the mainland China market.

The transaction is complex because Brilliance China isn't a direct shareholder in the joint venture: it exercises its interest through three layers of subsidiary companies.

A Brilliance China unit - the first layer - will purchase 9% of the 10% interest of Shenyang Automobile Industry Asset Management Co., the government company, in a firm called Shenyang Xinjinbei Investment & Development Co., which is the second of those layers.

The other government company, Shenyang Jinbei Automotive Industry, will purchase the remaining 1% interest for CNY15 million. That company already owns 1% of yet another Brilliance subsidiary, Shenyang Jinbei Automotive Industry Holdings Co., which is the third layer and the actual owner of a 50% stake in the BMW joint venture.

After the transaction, the seller, Shenyang Automobile Industry Asset Management, will no longer have any stake in the Brilliance subsidiaries connected to the BMW venture. But the other government company, Shenyang Jinbei, will hold a 1% stake in the second and third layer companies that control Brilliance's interest in the venture.

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