China's Weichai to buy stake in truck maker Foton

SHANGHAI, July 1 (Reuters) - Major Chinese engine maker Weichai Power Co (000338.SZ) (2338.HK) said on Tuesday it has agreed to take a stake in Beiqi Foton Motor Co (600166.SS) under a deal to expand its business ties with the truck maker.

Under a legally binding framework agreement, Weichai will become a strategic investor in Foton by participating in a share placement, it said a statement.

It gave no details on the amount of shares it would buy.

Weichai will also gradually increase its supply of engines and other parts to Foton, which has in turn promised not to develop diesel engines for heavy trucks in competition with Weichai.

Foton said in March it won regulatory approval to place as many as 111.2 million new shares, equal to about 12 percent of its expanded share capital, with up to 10 institutional investors. Its state-run parent, Beijing Automotive Industry Holding, would buy 40 million shares.

In April, Foton reached a preliminary agreement to set up a truck-making joint venture with Daimler AG (DAIGn.DE). The two parties will finalise the deal after the Beijing Olympics in August, Beijing Auto Chairman Xu Heyi told Reuters last month.

In morning share trade on Tuesday, Foton's Shanghai-listed shares were up 0.78 percent at 6.49 yuan, defying a 1.45 percent drop in Shanghai's benchmark index .SSEC, while Weichai's Shenzhen-listed shares rose 0.5 percent to 40.50 yuan. (Reporting by Fang Yan; Editing by Edmund Klamann)