May 29, 2018 / 3:44 AM / in 20 days

Chinese firm to snap up German auto supplier Grammer

SHANGHAI/MUNICH (Reuters) - Auto supplier Ningbo Jifeng Auto Parts (603997.SS) is aiming to buy German rival Grammer (GMMG.DE) in an agreed deal at a time when Chinese takeovers face increased scrutiny from German and European authorities eager to protect domestic know-how.

The two companies signed a business combination agreement on Tuesday under which Ningo would offer 61.25 euros per share for Grammer, valuing the group at around 772 million euros ($893 million), including dividends.

Shares in Grammer closed 19.3 percent higher at 61.20 euros, just below the Ningbo offer price, on the news.

Grammer said the two companies aimed to deepen a strategic partnership, which started when the Chinese company took a stake in Grammer early last year, and to optimise its global footprint and secure a global growth strategy, without giving more detail.

The offer will test Germany’s willingness to tolerate Chinese takeovers, following an unsolicited approach by Geely (0175.HK) chairman Li Shufu to secure a $9 billion stake in Daimler (DAIGn.DE).

Ningbo’s offer comes as European lawmakers finalise a European proposal for greater scrutiny of investments made with state influence or aimed at transferring key technologies to a third country, a clear reference to some Chinese state-led firms that have bought European rivals.

It also comes less than a week after German Chancellor Angela Merkel, during a trip to China, called on the world’s No.2 economy to open up key industries to outside markets, demanding greater reciprocity between both regions when it comes to takeovers and market access to technologies.

Sources familiar with the matter said that Ningbo Jifeng is offering to guarantee jobs at Grammer for 7-1/2 years as part of the proposed transaction, which could soften possible opposition to a takeover.

Ningbo Jifeng already holds 25.51 percent of shares in Grammer, having raised its stake in October last year.

Sources told Reuters around that time the Chinese firm wanted to increase its stake amid a power struggle with a rival shareholder, Bosnia’s Hastor family.

Its management has generally welcomed the attention of Ningbo Jifeng, another supplier of vehicle interior components, as a potential “white knight” in its conflict with Hastor.

“We would view such a bid as positive as it offers the Hastor group a good opportunity to exit,” DZ Bank analyst Michael Punzet wrote in a note, keeping a “hold” rating on the stock.

Grammer said on Tuesday its executive board welcomed and supported the takeover offer.

Ningbo Jifeng’s offer will be conditional upon it obtaining at least 50 percent plus one share in Grammer, including the stake it already holds, as well as regulatory approvals.

Sources said the Chinese group was currently not aiming for a domination agreement, though.

($1 = 0.8644 euros)

Additional reporting by Christoph Steitz and Edward Taylor; Editing by Himani Sarkar/Alexandra Hudson/David Evans

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