First, as Victor texted from his cell phone from China, “This is it!”
And as our own commenter Bravada essentially said, “It’s time to Haw-tai!”
Basically the deal has two arms.
- It gives Saab a very strong alliance in the Chinese market, not only to sell their cars in a vast dealer network, but also as a major opening for possible technology sharing and partnerships. This should help defray future development costs, especially for things like diesel engines which Hawtai has proven to be quite good at, and RedJ points out should give Saab access to the VM V6 diesel engine family again. In fact, at least a dozen manufacturers in China were vying to tie up with Saab, but they chose Hawtai because of their partnership with Italian VM Motori and their new advanced diesel engine plant.
- It allows Saab a lifeline to continue operating with mid-term financing subject to approval from the Chinese government, EIB and Swedish NDO.
- Many have noted in comments that the NG 9-3 will be built in China at a Hawtai factory exclusively for Chinese production. This was confirmed to several reporters at the press conference. “Production in China is for China, production in Trollhättan is for the rest of the world,” said Muller. “We believe we will sell more Saabs and if they are to be exported from Sweden, we will need more employees in Trollhättan,” he went on.
- Muller expects the first payment to go through within the next 10 days, the rest of the €150 million will need to be approved by the Chinese government, EIB, and Swedish NDO and take 6-12 weeks. Any deal over $100 million US needs to be approved by the Chinese government, and China Car Times believes the deal should go through. According to Unni Jerndal, communications director at the National Debt Office, it has not received an application for ownership assessment yet, but as soon as it comes in they will try to work as quickly as they can. Fortunately the Gemini loan gives them a little breathing room.
- According to Lars Carlstrom, Antonov was heavily involved in Saab’s deal though he hasn’t received approval to be part of Saab by the EIB just yet. “We have been eyeing Hawtai for a while and know about their activities. What we have learned is very, very positive,” he told just-auto.com.
- The Spyker (soon to be Swedish Automobile) board will go from 3 seats to 4, adding a spot for Hawtai at the table.
- By having the Chinese as part owners (up to 29.9%), that means they have a vested interest in Saab’s success, not just their own. This means they should be much more willing to develop technology on Saab’s behalf. When Saab makes money, they do too– this can’t be overlooked, and is one of the hidden benefits of the deal.
- Also noted in comments by Niklas from an SvD interview, Victor Muller says that the current contract does not allow Hawtai to use Saab technology in their cars, but they are open to that possibility in the future. This means more cash for Saab, in essence this extends their potential lifeline even further.
Having a partner in the worlds largest auto market can’t be undersold, Saab needs a Chinese partner if they want to thrive, and they need to establish a foothold ASAP. Hopefully this allows them to revise their business plan in the medium term (Victor Muller says this means a year) to reduce pressure on other markets to produce higher sales numbers.
Also, Hawtai is actually quite good at a few things. For such a young company (only a decade old), they’ve invested heavily in clean diesel technology and worked with partners like ZF on engine gearboxes. While many have noted they have a history of less than desirable practices in their design department, they have invested heavily in R&D. According to China Car Times, Hawtai is owned by a very powerful parent group (the aptly named Hawtai Group) that had the foresight to envision the Chinese auto industry as one of the major growth areas in the world economy. So far they’ve bet right, if you ask me. The Hawtai Group has a net worth of 13.6 billion RMB (€1.41 billion) and is classified as one of China’s top 500 companies. So far their main industries include paper making, chemicals, forestry, supplying electricity and heating, and also international logistics.
On the second part, or the ownership stake, let’s break it down. As a part of the €150 million transaction, Hawtai will invest €120 million for up to a maximum of a 29.9 percent equity stake in Spyker on a fully diluted basis. In other words, they’re paying 4 times as much as Vladimir Antonov is for the same amount of the company. But that’s not the whole story, as Vladimir appears to be leveraged from several other angles through Gemini Fund, and his agreement to purchase and leaseback Saab property. With Hawtai, the deal makes much more sense in this more concrete initial investment. Like we mentioned before this deal shook out, we didn’t expect that any Chinese company would be able to acquire more than 29.9% of Saab, lest they be required to submit an offer to buy the remaining shares per Dutch law.
The remaining €30 million will be in the form of a convertible loan agreement in the amount of €30 million with a 6 month maturity, an interest rate of 7% per annum and a conversion price of €4.88 per share. This deal must be approved by certain Chinese governmental agencies, the EIB and the Swedish National Debt Office. As part of the transaction, Tenaci Capital will convert €42 million of its current loan to Spyker into share capital in Spyker at EUR 4.88 per share, which also means Victor on paper is essentially selling a huge portion of his interest in Spyker to the Chinese.
So what does the resultant ownership picture look like? Well it’s not exactly as simple as carving it up into 3 little pieces, but that’s nearly what we have. Vladimir Antonov will own 29.9% of the shares of the company, Hawtai will own up to 29.9% (if the 24.6 million shares work out to that number, but it won’t exceed that amount), and the 40% left over is split between the rest of the shareholders, of which there are a number that we’ll delve into in longer form later. The importance of this announcement is that Saab now has a strong Asian partner that will bring a lot to the table, not the least of which is a lifeline.