Saab to Enter Deal with Second Chinese Partner

Saab may soon be partially relieved of its financial woes, as the company has signed a 136-million-Euro ($195-million) memorandum of understanding with Zhejiang Youngman Lotus Automobile Co., according to Reuters. That amount would grant Youngman an equity stake in Saab parent company Spyker, and should allow the Swedish automaker to keep the lights on at its Trollhattan plant – which shut down production once again this week. Just as with Saab’s other deals with Chinese companies, the partnership is contingent upon the Chinese government’s approval.

When Saab and Chinese car distributor Pang Da entered a deal last month, the 30 million Euros paid in advance to Saab was apparently only enough to keep the plants running for a few weeks. Now looking for more Chinese partners, Saab has turned to Youngman for additional funds. This latest deal would apportion 29.9 percent of Spyker to Youngman, which will pay 136 million Euros at 4.19 per share. The Chinese company takes a stake in Spyker on a fully diluted basis, meaning that the shares purchased are at their maximum potential value. The deal also makes Youngman an equal partner with Saab in a manufacturing joint venture in China, with each party holding a 45-percent stake and Pang Da controlling the remaining 10 percent. Youngman is also entitled to a 33-percent stake in a distribution deal, while Pang Da holds 34 percent and Saab 33 percent.

As the Chinese government is strict when it comes to outbound acquisitions, getting the green light from officials in Beijing could be the major hang-up for the deal. Failure to get government approval was part of the reason that Saab’s deal with Hawtai early last month fell through, and government intervention also blocked Sichuan Tengzhong from acquiring the Hummer brand from General Motors in 2010. If it does go through, the deal with Youngman could help stabilize Saab’s financial future.

Production at Saab’s plant in Trollhattan will remain halted for the week, as Saab’s management tries to negotiate with suppliers and acquire more funds.

Source: Reuters

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