Unsuccessful bid for strapped carmaker may make firms think twice, analysts say

BEIJING - Chinese automakers should learn a lesson from recent failed attempts to purchase Saab Automobile AB and should think hard before making acquisition overtures to ailing foreign car companies, said analysts.

On Monday, Swedish Automobile NV (Swan), the parent company of the cash-strapped Swedish automaker, said that Saab Automobile had filed for bankruptcy, thus closing the door to potential Chinese buyers Zhejiang Youngman Lotus Automobile Co Ltd and Pang Da Automobile Trade Co.

In October, Pang Da and Youngman agreed to a joint $140 million takeover of Saab and its UK dealer network, which would have given Youngman a 60 percent stake in the Swedish company and Pang Da the remaining stock.

However, General Motors Co, which has both preferential shares and technology ties in Saab, insisted earlier this month that "it would not approve of a transaction involving Youngman".

"Having received the recent position of General Motors on the contemplated transaction with Saab Automobile, Youngman informed Saab Automobile that the funding to continue and complete the reorganization (of Saab Automobile) could not be concluded," Swan said.

At a news briefing on Monday, Youngman President Huang Zhiqiang said that the privately owned automaker "would not continue to negotiate with Saab following the company's declaration of bankruptcy".

Wang Yin, assistant to Pang Da Chairman Pang Qinghua, was quoted by China Business News as saying that "Pang Da will participate in Saab's bankruptcy liquidation to assess the losses incurred during the bid".

Pang Da has handed over 45 million euros ($59 million) to Saab as a deposit, but it's uncertain whether the Chinese company will be reimbursed.

According to Saab, bankruptcy protection is essential to protect the interests of shareholders. Meanwhile, analysts said that it is still too early to calculate the loss to the Chinese investors before the local court makes the final decision.

"Actually, Saab is not worth buying," said Zhong Shi, an independent analyst based in Beijing. "It's clear that Youngman wants to leap forward to catch up with its domestic and international rivals through the short cut of acquiring technologies and brands from Saab. But it should consider whether the unprofitable Saab deserves the capital injection," said Zhong.

"Saab should have filed for bankruptcy a year ago. No matter which entity takes over Saab, it will throw good money at a bad choice," said another analyst, who declined to be named.

"It will be very risky to own the waning Saab. It would require at least 20 years to profit from any investment in Saab," he explained.

"There will certainly be great losses for the Chinese investors from the Saab bid," said analyst Jia Xinguang.

"Hopefully, this unsuccessful acquisition attempt will ring alarm bells for anxious domestic players who are looking to go abroad, forcing them to think carefully before taking out their wallets."

Alex Fan, president of the Los Angeles-based merger and acquisition specialist Crestridge Consulting Inc, said in an earlier interview with China Daily that Chinese automakers should shift their attention from ailing carmakers to struggling parts suppliers, as such acquisitions are likely to be less risky.

China Daily