Malaysian conglomerate DRB-Hicom Bhd. agreed to sell a 49.9 percent stake in its unprofitable carmaker Proton Holdings Bhd. to Chinese billionaire Li Shufu’s Zhejiang Geely Holding Group.
Geely will also buy a 51 percent stake in British sports-car maker Lotus Cars from Proton and the two parties expect to sign a final agreement before the end of July, the Chinese company said on Wednesday. DRB-Hicom is still negotiating on the transaction price, after reaching agreement on a ballpark figure, Group Managing Director Syed Faisal Albar said at a press conference in Putrajaya.
The Chinese automaker, which acquired Sweden’s Volvo Cars in 2010, said the agreement lays the foundation for it to explore synergies with Proton and Lotus in areas such as research and development, manufacturing and marketing. Geely will seek to transform the two carmakers, and aims to build Proton into the most competitive brand in Malaysia and a leading nameplate in Southeast Asia.
“With Proton and Lotus joining the Geely Group portfolio of brands we strengthen our global footprint and develop a beachhead in Southeast Asia,” Geely’s Chief Financial Officer Daniel Li said in the statement. “We also aim to unleash the full potential of Lotus Cars and bring it into a new phase of development, thanks to our experience accumulated through Volvo Car’s revitalization.”
Proton, controlled by Malaysian tycoon Syed Mokhtar Al-Bukhary’s DRB-Hicom, was set up in 1983 by former Prime Minister Mahathir Mohamad to steer the Southeast Asian nation’s industrialization plan. The agreement marks the end of a lengthy sale process for the carmaker, which had to seek a foreign partner as part of conditions for a government rescue loan. For Geely, the purchase comes about seven years after it bought Volvo Cars from Ford Motor Co. for $1.5 billion.
An investment “would allow Geely to move into the Asean market efficiently with a ready-made after-market network, which otherwise would take years,” said Jochen Siebert, the Singapore-based managing director of JSC Automotive Consulting, referring to the grouping of Southeast Asian nations. “Li Shufu probably knows that the European, US, Japanese and Korean markets are not good targets for a new player, while Asean could become the next big thing.”
Proton has two factories in Malaysia”•one in Shah Alam and the other in Tanjung Malim”•with a combined capacity to build 350,000 vehicles a year. DRB-Hicom said in a February statement that a new partner would help improve the utilization rate at the Tanjung Malim plant.