Automotive News Europe
May 23, 2017 19:14 CET
— UPDATED: May 24 8:56 CET – adds confirmation
KUALA LUMPUR — Chinese automaker Zhejiang Geely Holding will buy a 49.9 percent stake in struggling carmaker Proton from Malaysian conglomerate DRB-Hicom.
Geely will also acquire a majority share of 51 percent of UK sports automaker Lotus Cars from Proton, Geely said in a statement on Wednesday.
Geely is the parent company of Hong Kong-based Geely Automobile Holdings and Sweden’s Volvo Car Group.
Geely said it is committed to reviving both Proton and Lotus.
“The agreement lays the foundation for a wider framework for both Geely Holding, Proton and Lotus to explore joint synergies in areas such as research and development, manufacturing and market presence,” Geely said in the statement.
Geely and Proton aim to build Proton into the most competitive brand in Malaysia and a leading brand in southeast Asia, the statement said.
“We also aim to unleash the full potential of Lotus Cars and bring it into a new phase of development by expanding and accelerating the rolling out of new products and technologies,” Geely’s chief financial officer, Daniel Donghui Li, said in the statement.
Other companies that have expressed interest in Proton include Peugeot maker PSA Group, French rival Renault and Japan’s Suzuki Motor.
Proton re-badges cars from foreign manufacturers to sell in the local market, but its quality has declined in recent years. The company has two Malaysian plants with an annual capacity of 400,000 cars, currently running far below maximum output.
An earlier attempt in 2007 to woo new partners for Proton foundered on the Malaysian government’s refusal to allow foreign bidders to acquire control.
Geely’s investment would help Proton grow its sales overseas and recover some of the global presence it has lost in recent years, people familiar with the bidding process told Reuters in February. By offering some of its own technology, Geely hopes to lift Proton’s sales in right hand-drive markets including Malaysia, the UK, India and Australia, they said.
Lotus Cars, known for its lightweight chassis technology, may help Geely in meeting stringent fuel-economy rules set to kick in over the next few years.
Geely said the deal is subject to regulatory approval and the signing of a definitive agreement. It gave no value for the deal, which both parties expect to sign in July.
When DRB-Hicom privatized Proton in 2012 after buying a 43 percent stake from state-owned investment firm Khazanah Nasional, the deal valued Proton at 2.8 billion ringgit ($645 million).
With sales flagging, Malaysia’s government stepped in April 2016 to make a 1.5 billion ringgit loan to Proton, which allowed it to avoid defaulting on obligations to suppliers. The agreement came with a rider that Proton find a major new investor to put it on a more sustainable financial footing.
Reuters and Bloomberg contributed to this report