Dongfeng intervenes in the control of Jinlong Motor Co., Ltd.

Dongfeng Motor Company recently signed a framework cooperation agreement with the Fujian Provincial Government. According to the agreement, Dongfeng Motor, which is owned by the provincial state-owned Fuzhou Automobile Group, will achieve an annual sales volume of 300,000 vehicles (including engines). Dongfeng will be re-transferred from the provincial SASAC and become the controlling shareholder of Fuqi Group.

Although Dongfeng’s goal is not directly targeted at A-share listed company Golden Dragon Motors, as the first and second largest shareholders of Golden Dragon Motors are Fuqi Group and Xiamen State-owned Haiyi Group, respectively, and the proportion of equity is not far behind, so it is around Jinlong. The control of the car, the future of Dongfeng Motor and Xiamen state-owned enterprises, may set off a fight for equity.

Dongfeng Fuqi restructuring

Jinlong announced the change of shares

According to the caliber of Dongfeng Automobile, “If it can proceed smoothly, the timeline for the holding of Fuqi Group will be in 2015. Fujian will become one of Dongfeng’s southern bases”.

Fuqi Group is a state-owned enterprise in Fujian Province. It has a number of vehicle companies, including Southeast Auto, Fujian Benz, Fujian New Longma and Xiamen Jinlong Automobile. Jinlong Motors is the only domestic A-share listed company in the group; Xiamen state-owned enterprises Wing Group is the second largest shareholder of Golden Dragon Motor after Fuzhou Automobile Group.

Although the target set by both Dongfeng Motor and the holding Fuzhou Automobile Group is Southeast Automotive, the condition is that “the annual sales volume of Southeast Automotive (including the engine) will reach 300,000 vehicles”, just before the signing of the agreement between the two parties on May 14, Jinlong Automobile. Suddenly announced that the Xiamen Municipal Government has studied the assets reorganization of Xiamen State-owned Assets Management Co., Ltd. (hereinafter referred to as "Shuncheng Company"), a state-owned wholly-owned subsidiary of the Xiamen State-owned Assets Supervision and Administration Commission. Xiamen State-owned Assets Supervision and Administration Commission plans to entrust Shuncheng with the company's trust. The management of Xiamen Electronic Equipment Co., Ltd. was transferred to Haiyi Group at no cost. Xiamen Electronic Equipment Co., Ltd. is now the third largest shareholder of Jinlong Auto, holding 34 million shares and holding 7.68% of the shares.

Previously, Fuzhou Automobile Group was originally the largest shareholder of Golden Dragon Auto, holding 13.52% of the shares, and Xiamen Haiyi Group was the second largest shareholder with a shareholding ratio of 13.02%. After the transfer of shares, Haiyi Group will hold 9,621.57 million shares of Golden Dragon Motor, accounting for 20.70% of the company's shares, which exceeds 13.52% of the shares held by Fuqi Group and become the largest shareholder of Golden Dragon Motors.

In fact, after the proportions of the two major shareholders of Shanghai Wing Group and Fuqi Group to Jinlong Automobile were basically close to each other, Haifeng Group became the actual controller of Jinlong Automobile as a result of commissioned by Fuqi Group to act as the supervisory authority. However, due to the timing of the announcement of the transfer of shares announced by Jinlong Auto on the eve of the signing of the agreement between Dongfeng Motor and the Fujian Provincial Government, the paper announcement was generally interpreted by the industry as “not to have deep meaning”.

Golden Dragon plays a decisive role

Twist of actual control

For Xiamen, Haiyi Group is the only heavy industry in state-owned enterprises and plays a decisive role in Xiamen's state-owned assets and economic structure.

Haiyi Group has two listed companies, namely Jinlong Automobile and Xiagong Machinery. The actual control rights returned to Xiamen's Jinlong Auto after many setbacks. For Xiamen, it is undoubtedly more global.

Jinlong Auto has jurisdiction over large and small Jinlong and Suzhou Golden Dragon. Dajinlong was established in 1988 and is the listed entity of the original Xiamen Automobile (now renamed as Jinlong Automobile). The initial major shareholder of Daikin Dragon was Xiamen Auto, which accounted for 75% of the shares, and Hong Kong’s Faya Yangko accounted for 25%. At that time, Dongfeng Motor Company developed a relatively advanced domestic R-13 chassis (engine rear chassis), and Xiamen Automobile sold 25% of its equity to Dongfeng. At the same time, Xiamen Automobile invited Huaneng to enter the capital and then took another 25% of the shares. At this point, Da Jinlong's equity structure is evenly matched by four players.

Afterwards, due to disagreements, in 2000, Faya Yangxing transferred its 25% equity to Chong Hing International. Later, Chuang Hing transferred this share of equity to Xiamen Auto. Huaneng also transferred its equity to Anyuan in 2003.

In addition, the competition between Fujian Automobile Industry Group and Xiamen International Investment Group at that time on Xiamen's auto control is also stagnant. In 2001, Fuqi Group transferred 17% of Xiamen Auto's shares from Xiamen Finance Bureau and became Xiamen Automobile's largest shareholder.

In 2004, Xiamen Automobile's actual control rights finally had a clearer result. Xiamen Automobile has acquired an equity of 25% from Anyuan, and has actually controlled the competition between Jinlong Motors, Fuzhou Automobile and Xiamen International Investment Corporation with 50% of its shares, and ended the withdrawal of Fuqi. After a personnel reelection, Haiyi Group was the second largest shareholder of Golden Dragon Motors, but it was the actual controller of Golden Dragon Motors because it was entrusted by the largest shareholder of Fuqi Group to act as the supervisor.

This is only one aspect of Jinlong Motor's frequent changes in its equity over the years. According to industry insiders, the reason why Dongfeng exited from Xiamen Auto in the past was why Xiamen Auto’s absolute control rights were lost. A series of doubts that still make the market difficult to understand may only be given in a specific era background to have a complete explanation.

Complementary resources

Dongfeng Jinlong teamwork can win together

After the transfer of the shares of Golden Dragon Motors, Haiyi Group became the first shareholder with 20.70% of the shares, effectively confirming the actual control of Golden Dragon Motors from the capital relationship. However, the industry is concerned that the Haiyi Group did not get 51% absolute control of Jinlong Motors, and the proportion of equity between the largest shareholder and the second largest shareholder is not much different. After Dongfeng Holding Fuqi, it is possible to infiltrate into the blank passenger car manufacturing field. If Dongfeng Motor wants to control the right to speak in the passenger car field, it will inevitably further integrate Jinlong Automobile and it is possible to purchase shares through the secondary market. This will inevitably lead to the secretive operation of the stock. Between Dongfeng Motor and Haiyi Group, a bidding war for Jinlong Automobile was triggered.

Of course, through intervening in the restructuring of Fuqi, if Dongfeng Energy and Jinlong join hands and complement each other, it will be a powerful cooperation that can change the domestic passenger car industry pattern.

As early as in 2004, in order to make the Xiamen automobile industry bigger and stronger, the Xiamen government has the intention to integrate large and small Jinlong and Suzhou Jinlong. It is hoped that through the integration of three Golden Dragons, Xiamen will become an important large-scale automobile manufacturing base on the southeast coast.

As one of the largest passenger car chassis manufacturers in China, Dongfeng Motor is involved in the restructuring of Fuqi Automobile. Regardless of whether it will eventually hold Jinlong Automobiles, resource sharing among related companies will also bring benefits to Jinlong Motors. According to the agreement between Dongfeng Motor and the Fujian Provincial Government, after Dongfeng Motor has become a controlling shareholder, the integration of Jinlong Automobile and Fujian Mercedes-Benz will also commence.

In addition, once Dongfeng teamed up with Jinlong, the passenger vehicle chassis production capacity of the former integrated Jinlong Automobile's bus production capacity will undoubtedly bring the most formidable challenge to Yutong Motor, the current leader of the bus industry.

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