Mainland carmaker Zhejiang Geely is to buy out the assets and goodwill of the debt-laden manufacturer of London taxis, Manganese Bronze for £11.04 million.
As Geely will take over the servicing of all the taxi maker's existing vehicles, it will have to shoulder the repair costs of the 400 Manganese Bronze taxis that were recalled in October because of a fault in their steering boxes.
While the last valuation of the century-old British company was understood to be just £2.7 million when it was taken into administration by PricewaterhouseCoopers in October, Geely's spokesman, Victor Young, said Geely was Manganese Bronze's biggest single creditor and the acquisition price factored in all the costs the taxi maker owed it.
Geely, which already owned 20 per cent of the cab maker before the buyout, said in a statement yesterday that it would continue to manufacture the TX4, Manganese Bronze's current taxi model, at its plant in Coventry in the West Midlands.
However, Young said, the company would also seek to develop new models in the light of rising competition from Mercedes-Benz and Nissan.
Geely said it would redeploy Manganese Bronze's 300-strong workforce as much as possible.
Jeff Chung, an analyst at Daiwa Capital Markets, said the acquisition was meant as a long-term investment.
"There may not be much upside for Geely in this deal, but in the long run, Manganese Bronze's connection and sales network can help Geely penetrate the European market while helping the Chinese carmaker to understand the law and regulations there," he said.
Geely's car exports exceeded 100,000 units for the first time last year.
Chung said the bottom line is that the deal does not affect Geely's listed arm, Geely Automobile.
"It does not matter if Geely did not acquire the company with the best price, Manganese Bronze is a very established brand in the UK and £11.04 million is peanuts for Geely," he said.
Manganese Bronze, established in 1899, was once an important carmaking conglomerate in Britain. More than 130,000 of its iconic black cabs have been produced over the years.
The share price of Geely Automobile rose 2.48 per cent yesterday to close at HK$4.15.