Evergrande Motors Plans to Sell 29% Stake in Evergrande Auto
After a suspension of trading for 5 consecutive days, Evergrande Auto, a subsidiary of China Evergrande, is planning to sell approximately 29% of its stake in Evergrande Motors. According to a March announcement, Evergrande Auto Group has accumulated losses of 110.841 billion yuan and shareholder losses of 37.693 billion yuan.
Based on reports from First Financial and National Business Daily, on the evening of May 26, Evergrande Auto released an announcement on the Hong Kong Stock Exchange that China Evergrande, the liquidator of Evergrande, Evergrande Health Industry Group Limited, Acelin Global Limited, and a third-party buyer have agreed to terms for the sale of Evergrande Auto’s shares.
According to the terms of the agreement, the buying and selling parties will further sign a final purchase agreement regarding the sale. It was disclosed that China Evergrande holds approximately 6.347 billion shares of Evergrande Auto, accounting for around 58.5% of all issued shares, which will all be sold.
The announcement stated that after the signing of the purchase agreement and within the terms and conditions, around 3.14 billion shares of potential to-be-sold shares will be instantly acquired, equating to approximately 29% of Evergrande Auto’s issued shares, while another roughly 3.203 billion shares of potential to-be-sold shares, about 29.5%, will become the subject of an option exercisable by the buyer within a certain period after the purchase agreement date.
This move indicates that after the completion of the above transaction, China Evergrande will no longer hold any shares in Evergrande Auto.
On the evening of May 22, Evergrande Auto announced on the Hong Kong Stock Exchange that its subsidiary, Evergrande New Energy Vehicle Investment Holdings Group Limited, and other affiliated companies have recently received correspondence from local administrative authorities.
Since April 29, 2019, the related affiliated companies signed a series of investment cooperation agreements with the local administrative authorities. Due to the failure of the company to fulfil its contractual obligations as stipulated in the agreements, the local administrative authorities intend to demand the related affiliated companies to terminate the agreements and return approximately 1.9 billion yuan in rewards and subsidies that have been issued. The related affiliated companies will be jointly liable. Currently, the related affiliated companies plan to coordinate with the local administrative authorities. Trading of the company’s shares will continue to be suspended until further notice.
On March 27, Evergrande Auto released its annual performance announcement on the Hong Kong Stock Exchange. The announcement revealed that Evergrande Auto suffered a total net loss of 11.995 billion yuan in 2023.
According to the announcement, as of December 31, 2023, the group’s accumulated losses and shareholder losses were 110.841 billion yuan (compared to 98.906 billion yuan in 2022) and 37.693 billion yuan (compared to 68.651 billion yuan in 2022), respectively.
The Tianjin factory is one of the crucial automobile production bases for Evergrande Auto. As of December 31, 2023, the Tianjin manufacturing base produced 1,700 units of the Evergrande Hengchi 5 model to meet market demand, with over 1,389 units delivered. Due to financial constraints, the group arranged for some staff to take leave, leading to a temporary halt in production at the Tianjin factory.
It is worth noting that in 2021, the Evergrande Group faced a debt crisis, owing over 1.96 trillion yuan to suppliers, creditors, and investors. On August 17, 2023, Evergrande Group filed for bankruptcy protection in New York, USA. On September 28 of the same year, trading of Evergrande-related stocks, including China Evergrande, Evergrande Auto, and Evergrande Property, was suspended on the Hong Kong Stock Exchange. On the same evening, Evergrande announced that its founder and chairman, Xu Jiayin, was under forced measures due to suspected illegal activities.