GAC Group announced plans to acquire part of the joint-venture shares held by FAW Corporation. The consideration will be paid through a share exchange using newly issued shares, and the target is believed to be FAW Toyota. The capital restructuring, set against the backdrop of EV adoption and intensifying competition, is attracting attention.
Chinese automakers GAC Group and FAW Group are considering a capital alliance involving a joint venture under their respective groups. The target is part of the shares in a vehicle manufacturing joint venture in which FAW Corporation holds an investment, and FAW Toyota has been reported as the name of the acquisition target.
If the transaction is completed as a share exchange using newly issued shares as consideration, GAC Group will increase its stake in FAW Corporation, while the Guangzhou municipal government will maintain control of GAC Group's management and FAW Group may improve the liquidity of its assets. No definitive acquisition ratio or transaction value has been disclosed.
Against a backdrop of EV adoption and intensifying competition, GAC Group is said to be seeking to improve its financial base while strengthening its use of technological resources gained through long-standing joint ventures, including its relationship with Honda.
The capital alliance between the two companies could trigger a restructuring of Toyota's China operations. However, no formal agreement has been reached, and reviews by the relevant authorities and the companies' internal procedures will be the focus going forward. The report concerns the stage of an agreement on a letter of intent between GAC Group and FAW Corporation.