SHANGHAI (Bloomberg) -- General Motors Co. sold a $500 million stake in its initial public offering to Chinese partner SAIC Motor Corp., cementing ties that have helped the American company boost sales in the world's largest auto market.
SAIC bought the 0.97 percent stake “on the basis of a good strategic partnership between the two” and its “confidence in GM's development prospects,” the Shanghai-based carmaker said. The company will raise funds for the investment from Hong Kong financial markets, it said.
The share purchase follows Detroit-based GM saying this month that it will raise its stake in SAIC-GM-Wuling Automotive Co., one of the companies' two partnerships in China, to 44 percent from 34 percent. GM, which went bankrupt last year after almost a century on the New York Stock Exchange, returns to public trading yesterday following an initial public offering that raised more than $20 billion.
“Shanghai Auto, the most successful automotive company in China, who is our partner in China, is absolutely critical to GM's success,” Dan Akerson, GM's chief executive officer said in a Bloomberg Television interview in New York yesterday. “I think the pairing and the strategic investment by SAIC, and the relationship that we have is a strong positive, a strong plus for General Motors.”
GM closed 3.6 percent higher at $34.19 overnight, after climbing 9.1 percent in the first hour of New York trading. SAIC shares are rose 1.4 percent to 18.26 yuan as of 9:59 a.m. in Shanghai. The stock has declined 9 percent this year.
China is GM's biggest market by unit sales and its alliance with SAIC is the biggest auto-producing venture in the nation.
The U.S. carmaker filed for an IPO in August as the U.S. government seeks to pare the 61 percent stake it gained in the company through its bankruptcy and $50 billion taxpayer bailout last year.
GM reported third-quarter net income of $2.16 billion last week, bringing the automaker's earnings this year to $4.77 billion. That tops the $4.46 billion profit by Toyota Motor Corp., the world's largest automaker, according to data compiled by Bloomberg.
SAIC owns 50.1 percent of SAIC-GM-Wuling, maker of the 30,000 yuan ($4,521) Sunshine minivan, and 51 percent of Shanghai GM, which builds cars such as Chevrolet Lova compacts and Buick sedans with the U.S. automaker.
The Chinese automaker has made international acquisitions before with SAIC buying a 49 percent stake in South Korea's Ssangyong Motor Co. for $500 million in 2004. The Pyeongtaek- based Ssangyong, which entered bankruptcy protection last year after the global recession squeezed auto sales, may be acquired by India's Mahindra & Mahindra Ltd.
SAIC also owns the British Rover and MG sports-car brands and renamed Rover as Roewe in China after taking over the rights in 2005.
GM and its Chinese joint ventures sold 1.97 million vehicles through October, a 36 percent increase from a year earlier, making it the most successful car alliance in China. That compares with second-ranked Volkswagen AG, which delivered 1.48 million cars through September.