June 4, 2015 / 1:10 PM / 4 years ago

VW says China OKs bigger stake in venture with FAW

FRANKFURT (Reuters) - China has given Volkswagen (VOWG_p.DE) a green light to raise its stake in a joint venture with its local partner, state-owned automaker FAW, the German company said on Thursday.

“The Chinese government has approved in principle a possible increase in the stake,” a Volkswagen spokeswoman said.

She said VW and FAW had set up internal working groups to evaluate the move and had jointly hired external consultants to value the stake in FAW-Volkswagen.

“This is a standard worldwide process for the transfer of shares which, along with the negotiations, will last for some time,” the spokeswoman said.

Together with its joint ventures Shanghai Volkswagen and FAW-Volkswagen, the Volkswagen Group delivered a total of 3.7 million vehicles in China in 2014, representing an increase of 12.4 percent over the previous year.

The Volkswagen Group has 29 vehicle and component production locations in China.

Analysts at Evercore ISI said the joint venture (JV), in which VW holds a 40 percent stake, was of major importance to the German car maker.

“We assume the total value of the JV is in the area of 50 billion euros ($57 billion) which would imply that increasing its stake from 40 percent to 50 percent could cost VW 5 billion euros,” they said.

Volkswagen Chief Financial Officer Hans Dieter Poetsch said on April 29 that the carmaker had no merger or acquisition plans beyond the talks with FAW about possibly increasing its stake.

Reporting by Jonathan Gould and Edward Taylor; editing by David Clarke

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