China Global Dream Spurred Fiat Takeover Move Before Daimler

(Bloomberg) -- As it turns out, Daimler AG wasn't the only belle of the ball.

Li Shufu and his Zhejiang Geely Holding Group Co. held informal talks about a potential takeover of Fiat Chrysler Automobiles NV before China's biggest private automaker turned its attention toward Daimler, according to people familiar with the matter.

The Chinese billionaire approached the Italian-American carmaker in the middle of last year as he was scouting for options to expand outside China, said the people, who asked not to be identified as the move wasn't disclosed. Li opted not to make a formal offer as the two parties had different views on future valuations of Fiat Chrysler after the company's five-year growth plan through 2018, they said.

Having moved on from Fiat Chrysler, Li announced the purchase of a 7.3 billion-euro ($9 billion) stake in Daimler last week. With that deal -- the biggest investment by a Chinese company in an international automaker -- Geely has become the German company's largest shareholder. Geely already owns Volvo Car AB and last year agreed to buy an almost $4 billion stake in truckmaker Volvo AB.

“Mr. Li has the foresight to see the electrification evolution disrupting the traditional auto business model," said Steve Man, an analyst at Bloomberg Intelligence. “Automakers will need to align to drive greater synergies in vehicle development and production to keep costs down."

Click here for a Gadfly column on Geely's expansion push

Li's moves outside China have helped him stitch a string of assets across Europe that spans heavy trucks, luxury vehicles, a sports-car maker and the manufacturer of the iconic London cab. That should help the photographer-turned self-made billionaire get access to technology and forge partnerships in an era where Li believes traditional manufacturers can no longer go it alone and new entrants are poised to enter the market with changing technology.

Representatives for Geely and Fiat Chrysler declined to comment.

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Fiat Chrysler has a market value of 27 billion euros, after the shares advanced more than 70 percent in the past 12 months. The stock closed 1.3 percent higher in Milan Tuesday, after rising as much as 2 percent following Bloomberg's report. Shares of Geely Automobile Holdings Ltd., the publicly traded entity of the automobile group, rose 1.6 percent to HK$25.45 as of 11:31 a.m. in Hong Kong, giving it a market value of about $29 billion.

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As Geely and other Chinese automakers seek to expand in Europe and the U.S., Fiat Chrysler Chief Executive Officer Sergio Marchionne has been a vocal proponent of consolidation, arguing that the industry wastes money by developing multiple versions of the same technology. However, since General Motors Co. rebuffed his idea for a merger in 2015, the CEO has switched focus to cutting debt and has said the carmaker no longer needs a partner.

Fiat Chrysler is making progress toward a target to almost double profit by the end of this year from 2016, while the stock has also gained on speculation the company was courted by Chinese competitors. Great Wall Motor Co. said in August it was interested in the carmaker and specifically in buying its Jeep unit.

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Fiat Chrysler said in August it was “not approached” by Great Wall Motor and that the carmaker is "fully committed” to a five-year plan through 2018.

The size of China's car market has already surpassed the U.S. It's one area where local companies like Geely and Great Wall Motor are encouraged by the government to go overseas to secure key technologies and access to resources.

To contact Bloomberg News staff for this story: Tommaso Ebhardt in Milan at tebhardt@bloomberg.net, Tian Ying in Beijing at ytian@bloomberg.net, Ruth David in London at rdavid9@bloomberg.net.

To contact the editors responsible for this story: Vidya Root at vroot@bloomberg.net, Anand Krishnamoorthy at anandk@bloomberg.net, Aaron Kirchfeld at akirchfeld@bloomberg.net, Anthony Palazzo at apalazzo@bloomberg.net, John Bowker, Tom Lavell

©2018 Bloomberg L.P.

With assistance from Tommaso Ebhardt, Tian Ying, Ruth David