Geely transfers Proton shares to a different subsidiary to scale back ‘related transactions’ – what is that this about?

Final month, there was an announcement by Bursa Malaysia-listed DRB-Hicom, which mentioned that Zhejiang Geely Holding (ZGH), by way of wholly-owned subsidiary Geely Worldwide (Hong Kong) Ltd (GIHK), has transferred its complete fairness curiosity in Proton to a different subsidiary inside the wider Geely group.

In a submitting with the native bourse, the conglomerate mentioned the switch comprised 547.2 million peculiar shares, representing 49.9% fairness curiosity in Proton (the remaining is owned by DRB) and the recepient is an organization referred to as Linkstate Abroad Ltd.

“The switch of Proton shares from GIHK to Linkstate is not going to have any impact on the web belongings, earnings, gearing, share capital, shareholding construction and substantial shareholders’ shareholdings of the DRB-Hicom group for the monetary yr ending Dec 31, 2023,” the corporate mentioned, branding the transfer as “inner restructuring in Geely group”.

From Geely’s left hand to its proper hand, so there’s nothing to take a look at? Requested by readers, we did some checking and listed here are the findings.

First, the events concerned. ZGH is the holding firm that’s totally managed by founder Li Shufu and his proxy, and ZGH is the only shareholder of funding holding firm GIHK, which earlier than this, held the 49.9% stake in Proton. Geely values the fairness at RMB 1,063 million (RM689.3 million).

The Proton stake has been transferred to Linkstate, a direct wholly-owned subsidiary of Geely Vehicle Holdings Restricted, a Hong Kong-listed firm we’ll name Geely Auto. Simply consider Geely Auto because the Geely model, the carmaker, and ZGH because the holding firm belonging to Li, who controls about 40% of Geely Auto. In response to Geely Auto’s HKSE submitting dated January 20, the position of Proton underneath its umbrella streamlines issues, financially.

“The Group at present sells car elements and elements and supply R&D and expertise licensing providers to the Geely Holding Group in relation to the manufacture of Proton-branded automobiles. After completion of the Proton Acquisition, the Group will instantly promote car elements and elements and supply R&D and expertise licensing providers to the Proton Group, which is able to then stop to be a related individual of the Firm,” Geely Auto mentioned.

“The above association will scale back the variety of persevering with related transactions between the Group and the Geely Holding Group and thus scale back the Group’s reliance on the Geely Holding Group,” it added. Geely Auto may even “proceed to help the enterprise improvement of Proton and can contemplate to supply additional monetary help pro-rata to its curiosity in Proton”.

Now, we’ve at all times seen Proton as Geely’s arm in Malaysia and ASEAN, and that’s as a result of Proton – underneath Geely’s management – has at all times said its intention to be primary in Malaysia and a high three participant in ASEAN. And so, we’re assuming Geely merchandise will enter our nation and regional markets with Proton badges, identical to how it’s with Brunei.

However we’re now listening to that Geely is in talks to instantly enter the Thailand market. Whereas the carmaker flatly rejected the Reuters report, it’s recognized that Thailand’s Board of Funding held talks with 5 main Chinese language EV makers together with Geely throughout a roadshow to China in April.

Additionally, again in November 2021, we reported that Lynk & Co – a JV between Geely Auto and Volvo – will enter Malaysia. Within the “Sensible Geely 2025” strategic roadmap, the group mentioned that “Lynk & Co will increase its international presence by getting into Russia, Malaysia, Australia, and New Zealand amongst others,” with out giving a timeline. Premium EV model Zeekr may additionally be on the way in which right here.

So, apart from extra easy accounting, may the Proton share switch train from ZGH/GIHK to Linkstate/Geely Auto additionally take away the opportunity of battle of curiosity ought to Lynk & Co enter our market and rival Proton, so to talk? In authorized phrases, after all, as each left and proper arms belong to ZGH and in the end Li Shufu. Mere hypothesis at this level, after all.

How may Geely do that to Proton, some may ask. Wasn’t Proton presupposed to be the Geely empire’s sole enforcer within the area? We are going to by no means actually know what Geely’s unique plans for Proton had been, or whether or not the problem of the duty (an early declaration to be primary in Malaysia and high three in ASEAN sounded overambitious then, nonetheless is now) has altered the grand scheme for the formidable Chinese language firm.

Anyway, Proton has extra capability in its automotive and engine vegetation in Tanjung Malim and contract meeting for the broader Geely group could be a supply of revenue.