Jardine Matheson to transfer its Chinese Mercedes-Benz showroom business to affiliate Zhongsheng for US$1.3 billion

Jardine Matheson has reached an agreement to transfer the China business, currently operated under its Zung Fu brand, to Zhongsheng Group in a cash and shares deal

The US$1.3 billion deal will lift Jardine Matheson’s stake in Zhongsheng to 21.25 per cent, making the conglomerate its second-biggest shareholder

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In China, Mercedes-Benz sold 774,000 units in 2020, representing an 11.7 per cent increase from the previous year. Photo: AFP

Published: 6:30am, 2 Jul 2021Updated: 11:07pm, 2 Jul 2021

Jardine Matheson said it will transfer its Mercedes-Benz business in China to its mainland car showroom affiliate, Zhongsheng Group, in a US$1.3 billion cash and shares deal that would raise its stake in the dealer to 21.25 per cent and make it the second-largest shareholder.

The conglomerate, which is the biggest landlord in Central through its subsidiary Hongkong Land, has reached an agreement to transfer the China business, currently operated under its Zung Fu brand, to Zhongsheng Group, Jardine Matheson said in a statement on Thursday.

The deal will lift its stake in Zhongsheng Group from 19.58 per cent, according to Zhongsheng Group’s 2020 annual report, making it the second-largest shareholder in Zhongsheng Group after its own founders.

“By integrating and aligning with one of China’s … automobile distribution groups, Jardines will enjoy an enhanced presence in China’s rapidly evolving auto sector,” said John Witt, group managing director of Jardine Matheson in the statement.

Zhongsheng will pay US$900 million in cash, with the rest of the balance settled in new shares to be issued to Jardine Motors, which is a subsidiary of Jardine Matheson, Zhongsheng said in a stock exchange filing on Thursday.

The issue price is set at HK$63.40, which represents about a 2.4 per cent discount to the closing price of June 29 at HK$64.95, the filing said.

In China, Mercedes-Benz sold 774,000 units in 2020, representing an 11.7 per cent increase from the previous year, data from Zhongsheng Group’s annual report shows. Hong Kong-listed Zhongsheng Group already distributes the luxury German brand in China.