Isuzu Aims to Triple Qingling Motors Stake, Pay HK$624 Million

May 21, 2005; Sau Chan writing for Bloomberg reported that Isuzu Motors Ltd., Japan's biggest maker of trucks and buses, plans to triple its stake in China's Qingling Motors Co. by offering HK$624 million ($80 million) to acquire about 325 million shares from independent shareholders.

Isuzu is seeking to raise its stake to 20 percent from about 7 percent by offering HK$1.92 for each share. The offer, disclosed in a Hong Kong exchange statement late yesterday, is a 29 percent premium to the last closing market price of HK$1.48 for Qingling, whose shares have been halted from trading since May 17.

Nomura International (Hong Kong) Ltd. is advising Isuzu, which said its wants to strengthen ties to Qingling, which produces trucks with the Japanese automaker in the world's third- biggest vehicle market. Isuzu, 8.4 percent owned by General Motors Corp., is expanding production and sales outside Japan after an economic slump at home reduced the need for new trucks.

Shares of Qingling, based in the western Chinese city of Chongqing, have gained 24.4 percent this year, compared with a 3.6 percent decline by the benchmark Hang Seng Index. The company has asked for the shares to resume trading on May 23.

Second-half profit last year at Qingling fell 50 percent after sales declined amid competition. Net income fell to 44.6 million yuan ($5.4 million) as sales declined 30 percent to 1.31 billion yuan. The figures were derived by subtracting first-half earnings from full-year profit.

Sales growth in China slowed last year as price cuts by automakers and dealers encouraged customers to postpone purchases in anticipation of further discounts. Qingling sold about 27,000 vehicles in 2004, 12 percent fewer than 2003, Merrill Lynch & Co. analyst Grace Mak wrote in an April 4 report.