Volkswagen will become the largest shareholder of Guoxuan High-Tech by acquiring a 23.1 per cent post-issue stake worth CNY 7.31 billion (USD 1.02 billion) in the Chinese power lithium battery manufacturer.
The German giant’s wholly-owned foreign subsidiary is subscribing for as many as 384.33 million new stocks at CNY 19.01 apiece.
Volkswagen China has also entered into a separate agreement to acquire 56.47 million existing shares, representing a 5.0 per cent stake, from Li Zhen and related parties; the move will take its overall interest to 26.5 per cent.
Car companies, including Mercedes-Benz, BMW and Toyota, have accelerated the production of electric vehicles as many countries have banned the sale of fuel-based automobiles from 2025 onwards.
The new energy industry is expected to benefit from the long-term upward trend of global car electrification.
Guoxuan High-Tech said it would use proceeds to take advantage of these opportunities by increasing its lithium battery production capacity and developing its presence in the cathode material industry.
An improved industrial chain and increased output will meet expected demand from high-end downstream customers, while the strategic cooperation with Volkswagen China should boost competitiveness and overall performance.
Guoxuan High-Tech’s expansion over the last few years has required a large amount of capital investment and liquidity.
The Nantong-registered company’s asset-liability ratio has steadily increased over the last three years, from 51.7 per cent in the financial year ending 31st December 2017, to 58.5 per cent in FY 2018 and 64.0 per cent in FY 2019.
Its capital increase should improve its financial position and ability to resist risks.
Volkswagen has already invested in four companies operating in the new energy battery segment.
The group owns 18.2 per cent of QuantumScope and 50.0 per cent of QSV Operations, both of which are based in the US, and indirectly holds 16.3 per cent of Northvolt of Sweden, and 50.0 per cent of Germany’s Northvolt Zwei.
© Zephus Ltd