Guangzhou Auto sweetens Denway buyout offer

HONG KONG (Reuters) - Guangzhou Automobile, China's sixth-biggest carmaker, said it will hike its offer to take unit Denway Motors 0203.HK private by 25 percent, as it readies for its own listing.

The revised offer sent shares of Denway, the carmaking partner of Japan's Honda Motor (7267.T), up as much as 12 percent on Tuesday before they eased later.

"They are making the whole offer more attractive by revising the share exchange ratio," said Rachel Miu, an analyst at DBS Vickers.

Guangzhou Auto said it would revise upwards the ratio of the planned Denway share swap to 0.474026 Guangzhou Auto share for each Denway share, from 0.378610, to "further enhance the attractiveness of the offer".

Other terms of the privatization proposal remained unchanged, the company said in a filing to the Hong Kong stock exchange on Tuesday morning.

A local partner of Toyota Motor Co (7203.T) and Fiat SpA (FIA.MI), Guangzhou Auto has a 37.9 percent stake in Denway. It also makes vehicles under its own brand.

Guangzhou Auto's listing will offer investors a chance to tap into the rapid growth of the world's biggest auto market.

Last month, Guangzhou Auto announced that it would issue $3.3 billion in new shares to privatize Denway as part of its own listing. Shareholders were to receive 0.378610 new Guangzhou Auto share for every Denway share held, implying a value of up to HK$5.49 ($0.704) per Denway share.

Shares of Denway rose 12.4 percent to a session high of HK$3.98 before paring gains to 2.3 percent by the close of trade. This Hang Seng Index .HSI finished up 0.6 percent.

"Guangzhou Auto has a broader product mix than Denway, which is a single-brand company, but the whole industry in terms of growth is decelerating," Miu added.

China's passenger car sales in May rose 25.8 percent from a year earlier, the slowest pace for any month this year, the official China Association of Automobile Manufacturers said on Tuesday.

Shares of competitor Dongfeng Motor Group Co Ltd (0489.HK) ended Tuesday down 0.7 percent.

However, Denway beat Dongfeng for the quarter, its shares falling by 12 percent against Dongfeng's 34 percent drop. The blue-chip Hang Seng Index was down 8 percent in the same period.

Templeton Asset Management, which has a 15.47 percent stake in Denway, had said it supported the privatization. (Editing by Chris Lewis and Valerie Lee)