The share price of Zhongsheng Group rose 8.85 per cent yesterday after Jardine Strategic announced it was investing HK$5.6 billion in the car dealer.
Jardines bought 236.5 million new Zhongsheng shares at HK$10.80 each, with the HK$2.57 billion deal giving it an 11.1 per stake in Zhongsheng. It also bought a HK$3.09 billion convertible bond that, if converted, would increase its stake to about 20 per cent.
The deal marks Jardines' first big investment in a listed mainland company.
"We have joint ventures in China but this would be the first material stake in a listed company [on the mainland]," said Neil McNamara, the director of group corporate affairs at parent firm Jardine Matheson.
Zhongsheng operates 163 dealerships across 15 provinces. Toyota and Mercedes-Benz are the firm's two biggest brands, contributing 25 per cent of revenue in 2012, according to Macquarie.
Jardines' subsidiary Zung Fu is a Mercedes-Benz dealership network with 29 outlets on the mainland, "so there is a strategic fit" between the entities, Macquarie said in a note to clients.