China SAIC, Nanjing Auto to sign tie-up deal

SHANGHAI (Reuters) - Top Chinese car maker SAIC Motor Corp will sign an agreement to buy the manufacturing assets of smaller rival Nanjing Automobile Group on Wednesday, the Shanghai Securities News said, in a deal worth up to $1.9 billion.

SAIC (600104.SS) said after the market closed on Tuesday that trade in its shares would be suspended on Wednesday, pending an announcement of "important news". It did not elaborate.

The newspaper said SAIC would give Nanjing Auto up to 8 percent of its outstanding shares in exchange for Nanjing Auto's vehicle and auto parts operations.

SAIC, which has a total of 6.55 billion outstanding shares, saw its Shanghai-listed local currency A shares close at 27.01 yuan on Tuesday, valuing the deal at up to 14 billion yuan ($1.9 billion).

The newspaper said the deal was likely to be wound up before the end of 2008 as it would still require Chinese regulatory approval. Once completed, the deal would be the biggest ever tie-up of Chinese auto makers, it said.

As China pries open its vehicle market, the world's second-largest, the government is encouraging a domestic industry consolidation to create a few local giants to compete head-on with global counterparts such as General Motors Corp GM.N, Volkswagen AG (VOWG.DE) and Toyota Motor Corp (7203.T).

SAIC's shares rose 2.7 percent on Tuesday in the heaviest trade for seven weeks. Analysts have said that while the tie-up may benefit SAIC in the long run, it will not necessarily help the company in the short term because of the mixed quality of Nanjing Auto's assets.

(Reporting by Lu Jianxin; Editing by Valerie Lee)