STOCKHOLM Struggling Saab is set to follow rival Swedish car maker Volvo into Chinese ownership under a planned 100 million euro ($141 million) rescue purchase by Pang Da Automobile Trade Co and Zhejiang Youngman Lotus Automobile Co.
Saab has not produced cars for months and has lurched from one cash crisis to another. It found itself under court protection from creditors to stop bankruptcy filings, a process which was in danger of collapsing before the new agreement.
The deal, announced on Friday, is set to bring a 70 million euro loss to current owner Swedish Automobile and will need the approval of General Motors and the Chinese authorities.
Swedish Automobile shares first surged on the Chinese sale news and then slumped 10 percent when the loss was revealed.
Nevertheless, Swedish Automobile SWAN.AS chief executive Victor Muller was pleased. "After the better part of seven months of agony for the company, we have come to a point where we can proudly say that we made it," he told a conference call.
Swedish Automobile said it had a memorandum of understanding under which auto maker Youngman and dealer Pang Da (601258.SS) are to pay a combined 100 million euros for 60 percent and 40 percent stakes, respectively.
He said eventual investments would likely be more than double the 245 million euros promised under an earlier deal.
If successful, it would be the second Chinese purchase of a Swedish car company in just over a year after Geely bought Volvo in August 2010 from Ford (F.N). Swedish Automobile, then called Spyker, itself rescued Saab from closure by former owner General Motors (GM.N) in early 2010.
Geely's purchase of Volvo, which aims to sell some 400,000 cars this year, was China's largest overseas auto acquisition.
Muller told journalists he was similarly confident about the fate of Saab "under the wings" of Youngman and Pang Da.
Muller has orchestrated a string of deals over the last few months to keep Saab afloat. The latest news came after a source told Reuters a new Chinese deal was close.
In a reminder other deals have fallen through, Swedish Automobile said the agreement was valid to November 15 and that final terms were still being worked on.
Muller, 52, a former mergers and acquisitions lawyer who made his fortune from Dutch fashion brand McGregor before revamping loss-making luxury sports car maker Spyker, is a fanatical collector of classic automobiles.
His passion for cars has cost him dearly in this case.
He told the conference call that Swedish Automobile, in which he is the biggest shareholder, would lose roughly 70 million euros from its Saab investment, having paid about 54 million euros for Saab and pumping in 120 million euros more.
After selling Saab, Swedish Automobile will be left with the Spyker sports car business, though it has already agreed to sell that to private equity company North Street Capital.
The deal, however, still needs a green light from the European Investment Bank and General Motors, as creditors to Saab. Muller said he had only had a brief talk with GM.
"If we play our cards right, I think that they will be convinced that this is of benefit to all parties, including themselves," he said of GM, the EIB and creditors.
He said that GM would be the most difficult party to convince. "It's going to be a lot of work, a lot of work," he said. He said Saab had a lot of relationships with GM and bought billions of parts and components from the U.S. company.
Muller, an ebullient character known for his unbounded optimism, who has spent much of this year traveling the world, tapping a network of friends and potential investors, said he believed in the future of the 60-year-old brand.
"I have had no life in the past two years... My job was to save the company. I think I achieved it," he said, adding that he felt great relief about the deal.
"We can be comfortable that the business plan that the company had made will now be executed and that the funding will be provided." Once the deal was secured, Muller said he had one thought. "First, I'm going to sleep a lot. No Saab, but sleep."
Martin Wastfelt, a lawyer at white-collar union Unionen with 1,100 members at Saab, stressed the deal was just an MOU and that what Saab needed was substantial financing.
"The most important thing is to have owners with a long-term perspective and who can finance the business," he said. "An owner with muscle is what it will take."
Muller said the two Chinese firms planned to keep making cars in Sweden as well as start production in China. He said Saab would have to be "extremely lucky" if production got rolling again this year.
Any new equity deal from the two Chinese investors would require approval from the Chinese government and the outcome could be far from certain because Beijing follows a strict and price-sensitive policy when it comes to overseas acquisitions.
Failure to gain Beijing's approval on time torpedoed a deal Saab had with another Chinese company, Hawtai Motor Group, in May. A separate deal for Sichuan Tengzhong Heavy Industrial Machinery's bid to buy General Motor's (GM.N) Hummer in 2010 also fell through because it did not win government support.
Pang Da chairman Pang Qinghua told Reuters earlier in the month that he had been in contact with the government and received positive feedback about its initial plan.
The prospect of a new Chinese deal persuaded court-appointed administrator Guy Lofalk to withdraw a request to terminate a creditor protection scheme, which the court had been due to rule on Friday. A decision against Saab could have led to a flood of bankruptcy petitions.
A meeting with creditors is due on Monday. ($1 = 0.707 Euros)
(Additional Reporting by Anna Ringstrom, Mia Shanley and Sara Webb; Editing by Helen Massy-Beresford and Jon Loades-Carter)