Brilliance Auto shares plunge by almost a third as BMW plans to buy control of Chinese joint venture
Carmaker’s Hong Kong-listed shares tank as investors fear the stake sale will reduce future profits
BMW’s key Chinese partner, Brilliance Automotive, plummeted by almost a third on Friday morning in Hong Kong, after it announced the German car giant will pay €3.6 billion (US$4.2 billion) to take control of their joint venture.
The deal will see BMW increase its stake in the partnership to 75 per cent from 50 per cent and makes it the first company in China’s vehicle sector to take advantage of Beijing’s removal of foreign-ownership limits.
News of the deal has alarmed investors, who fear Brilliance Auto will be left with a smaller share of future earnings from the joint venture.
Several investment banks cut their ratings or target prices for Brilliance Auto, including Bank of America Merrill Lynch and Nomura, while UBS said the sale of the stake could cost Brilliance Auto’s least half its profits.
Brilliance Auto, a state-owned car company headquartered in Shenyang, briefly dropped 30 per cent to HK$7.51 on Friday morning before recovering slightly to close 27 per cent lower at HK￥7.90.