Shares of Brilliance China Automotive Holdings Ltd (HK:1114) gained 4.5% today on news that the company’s majority shareholder and parent company, Brilliance Automotive Group, is considering the sale of a 25% stake in Brilliance China’s joint venture with German partner BMW AG (DE:BMW) to raise cash. As per a Bloomberg report, several Chinese automakers are interested and are in initial talks to purchase Brilliance China’s stake in the joint venture.
Background of the Potential Deal
BMW has a 75% stake in the joint venture BMW Brilliance Automotive (BBA), while Brilliance China holds the rest. BBA is a Shenyang-based auto manufacturing company that produces BMW autos. Brilliance China earns almost all its profits from BBA. The discussion of the stake sale is in the initial stages, and sources cautioned that the talks might end without a deal.
Brilliance China’s parent company, Brilliance Auto Group, has been accused of window-dressing its accounts and fined for the same. The parent company failed to meet its debt obligations in 2020. Since then, it has been undergoing strategic restructuring.
In 2023, the local government of Shenyang intervened and proposed to acquire Brilliance Auto and repay the creditors 16.4 billion yuan in installments. On the completion of the restructuring, the Shenyang government will have a nearly 30% stake in Brilliance China. The government said that it wasn’t aware of any potential sale of Brilliance China’s stake in the joint venture.
Is Brilliance China Automotive a Good Stock?
Brilliance China Automotive Holdings manufactures and sells automobiles. 1114 shares have gained 66.2% in the past year.
