Geely in running to buy stalled London cab firm

Mainland carmaker tipped as front runner to acquire debt-laden taxi manufacturer struggling with compensation payouts linked to recall

PUBLISHED : Saturday, 26 January, 2013, 12:00am
UPDATED : Thursday, 07 May, 2015, 2:35pm

Mainland carmaker Zhejiang Geely may buy out its London taxi manufacturing partner Manganese Bronze for less than £2.7 million (HK$33 million), a person familiar with the talks said.

Zhejiang Geely, the parent company of Hong Kong-listed Geely Automobile, proposed a deal to Manganese Bronze last month to buy out the remaining 80 per cent stake of the company, according to the person.

Manganese Bronze entered administration in October last year after failing to secure funding for its survival.

But the person said the offer could go well below £2.7 million - the last valuation of the company by its administrator PricewaterhouseCoopers - given the heavy debt it carried.

Manganese Bronze, manufacturer of the iconic London black taxi, faced a huge compensation payout after the company recalled 400 of its £35,000 TX4 taxis because of a fault in their steering boxes in October.

Zhejiang Geely, which owns 20 per cent of the company that was once listed in London, was among other bidders for the acquisition.

But Chinese media reports said Geely stood the highest chance of success given the pair's long-term partnership. Geely and Manganese Bronze formed a joint venture in 2006 to migrate part of the London taxi production line to Shanghai.

Jeff Chung, an analyst with Daiwa Capital Markets, said the acquisition could help boost Geely's technology and also give the mainland carmaker a better distribution network in Britain.

Geely's car exports exceeded 100,000 units for the first time last year and was also one of the 10 car companies out of the 25 surveyed by mainland media that met their sales targets.

But Nomura Securities analyst Steve Man said Manganese Bronze's advantages in Britain's taxi market had long diminished given its ageing product line as well as vigorous competition from Mercedes-Benz and other new entrants such as Nissan Motor, which has fuel-saving taxis due to enter the market later this year.

The firm's latest taxi model TX4 was first produced in 2006.

Manganese Bronze, which had been in the red since 2008, was reported to have sought a £15 million loan from Geely over the recall saga but the bailout talks fell through.

Apart from Manganese Bronze, Geely also bought Swedish carmaker Volvo in 2010 for US$1.5 billion.

Geely's share price fell in the past three days after hitting a one-year high at HK$4.39 on Tuesday. It closed 3.81 per cent lower at HK$4.04 yesterday.

Of the 28 brokerage firms that tracked and rated the company, half gave a buy or strong buy recommendation.