Tengzhong, GM agree to extend Hummer deadline
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Sichuan Tengzhong Heavy Industrial Machinery Co said Monday that it has agreed with General Motors to extend the deadline for its purchase of the Hummer brand by a month.
The Chinese firm said the extension was necessary, as the deal still needs regulatory approval from the government.
Tengzhong entered into a definitive agreement in October last year to acquire GM's premium all-terrain sports-utility vehicle brand Hummer.
The US automaker said in a statement that while the transaction approval process was not proceeding as per expectations, it was happy with the progress so far in the deal.
Chemical firm Lumena Resources Corp Chairman Suo Lang Duo Ji, one of the private entrepreneurs who backed the deal, had earlier said he expects the government to clear the deal before spring so that Hummer production could start in China.
Suo, also called Li Yan, had also confirmed the deal value at $150 million.
The Lumena chief said he and his associate would pay $30 million for a 20 percent stake in the new Hummer and Tengzhong will pay the rest after the deal is closed.
Outbound investments by Chinese enterprises need to be cleared formally by the Ministry of Commerce. Ministry officials, however, maintain that they are yet to receive an application from Tengzhong or other investors for clearance of the Hummer deal.
Tengzhong's bid to acquire Hummer after GM filed for bankruptcy protection last year has run into rough weather in the past few months with experts doubting the success of such a deal.
Zhang Xin, an analyst with Guotai & Jun'an Securities, feels that the deal would not get approval from the regulators due to environmental concerns as Hummers are seen as gas-guzzlers with high emissions.
Yet another hurdle for Tengzhong, a local company established in 2005 with registered capital of just 300 million yuan, is doubts on how it intends to fund the takeover considering that the deal value is nearly four times its capital base.
Meanwhile, carmaker Zhejiang Geely Holdings said last week that is had started final discussions with US auto giant Ford to buy its Volvo units. The carmaker expects to sign an agreement on Feb 8 and finish the whole transaction by May this year.
