China Evergrande in talks with Xiaomi consortium to sell EV unit stake

Reuters

Embattled Chinese property developer Evergrande Group is in talks with smartphone maker Xiaomi and Shenzhen state-backed investment firms as it looks to sell part of a 65% stake in its electric vehicle (EV) unit, three sources said.

The Evergrande New Energy Vehicle (NEV) Group had a market capitalisation of $12.5 billion on Thursday and one of the sources said the consortium is looking to buy a significant minority stake.

Evergrande, Xiaomi and Shenzhen’s state asset regulator did not respond to requests for comment.

The talks were said by the sources to be at an early stage and subject to changes.

The developer said last week that it was in discussions with several independent third-party investors on the proposed sale of certain assets, including stakes in Evergrande NEV, as part of its efforts to reduce its debt.

Smartphone maker Xiaomi has been ramping up investments in EV suppliers after it unveiled its EV ambition with an investment of $10 billion in March, following its peers from Apple Inc to Huawei Technologies Co as they bet on more cars becoming battery-powered and smart.

The potential deal would give Xiaomi EV production facilities to push forward its auto business, the sources said.

DEBT WARNING

Evergrande has been struggling to raise funds to pay its debts after Beijing stepped up curbs on the real estate sector to contain the risks of a bubble.

China’s central bank, banking and insurance regulator said they had summoned executives of Evergrande to a meeting on Thursday and issued a rare warning that the company ought to reduce its debt risks and prioritise stability.

Investors have been worried about Evergrande‘s financial health and the potential systemic financial risk it poses.

Concerns about Evergrande intensified after it failed in June to pay some commercial paper on time. A Chinese court froze a $20 million bank deposit held by the firm on the request of China Guangfa Bank last month.

In May, the developer put a 2.66% stake in Evergrande NEV on sale at a 20% discount to raise about HK$10.6 billion ($1.36 billion). Evergrande NEV warned of a 4.8 billion yuan ($739.67 million) net loss for the first half of 2021, according to its filing with the Hong Kong Stock Exchange, nearly double the loss a year ago.

The company unveiled nine EV models under the brand Hengchi at the Shanghai Auto Show earlier this year, vowing to start mass production and delivery from next year. It has built three manufacturing bases located in Guangzhou, Shanghai and Tianjin, and acquired a production permit for electric passenger vehicles by taking the controlling stake in NEVS AB in 2019.

Sales of new energy vehicles, including pure battery electric vehicles as well as plug-in hybrid and hydrogen fuel cell vehicles, are expected to make up 20% of China’s overall annual auto sales by 2025.

Reuters

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.