* Deal involves $1.8 bln for takeover, $900 mln in capital
* Mixture of Chinese and overseas funding sources
* Takeover is a "game changer" - source
By Michael Flaherty and Quentin Webb
HONG KONG/LONDON, March 29 China's Zhejiang
Geely Holding Group has lined up total financing of $2.7 billion
to back its purchase of Ford Motor's (F.N) Volvo car unit,
sources said on Monday.
The extra $900 million above the reported purchase price
will allow the Chinese auto maker to grow its business and draw
down capital during fallow cycles in the auto industry.
Ford and Geely announced their deal on Sunday, saying that
China's largest privately-run car maker would pay $1.8 billion
The breakdown of the offer includes a $200 million note
presented by Ford, $1.6 billion in equity and $900 million in so
called working capital, the sources said, a sum that can be used
for new product investments, launch costs, potential plant
upgrades and rainy day money to weather cyclical downturns.
Of the $1.6 billion in cash, a small majority comes from
Geely, while the rest comes from provincial Chinese government
investment vehicles, the sources said, adding that the remaining
money comes from Chinese and overseas lenders.
In December banking sources briefed on the plan said major
Chinese banks including Bank of China (3988.HK) (601988.SS),
China Construction Bank (0939.HK) and Export-Import Bank of
China had agreed to extend loans to Geely. [ID:nHKG130867]
It is not clear if these banks were among the lenders
providing working capital in the deal unveiled on Sunday.
One of the sources said that Volvo also has around $450
million in cash.
"The big thing here though is that it (the purchase) is the
first of its kind," the source said, who asked not to be named
because he is not authorised to speak on the record about the
"This deal does change the game significantly. In 10 years
time, the Chinese auto market will double the size of the U.S.
A spokesman for Geely declined to comment.
(Editing by David Cowell)