Daimler set to take 12% stake in Beijing Auto

Daimler CEO Dieter Zetsche, left, and BAIC Chairman Xu Heyi have both previously agreed to strengthen ties between the two companies.

BEIJING (Bloomberg) -- Daimler will sign a final agreement to buy a 12 percent stake in Beijing Automotive Group Co.'s passenger-car unit on Tuesday, securing a stake in its Chinese joint-venture partner ahead of a planned initial public offering.

The German automaker will sign the deal at the Beijing local government, Beijing Auto Chairman Xu Heyi said today in the Chinese capital. Hendrik Sackmann, a Daimler spokesman, said both companies were "progressing well" and that the automaker will communicate more when the contracts are signed.

Daimler previously said that as part of the transaction, the automaker will receive two seats on the BAIC board and added that it could allow the Chinese company to build cars off vehicle architectures used to make Mercedes-Benz vehicles.

BAIC also will increase ownership in a production joint venture to 51 percent from the current 50 percent.

The automakers' joint venture began production at the first Mercedes passenger-car engine plant outside of Germany in Beijing today.

Beijing Auto may "soon" invest in Daimler, depending on the market situation and how many funds it has at its disposal, Xu said, without being more specific. The agreement paves the way for BAIC to pursue an IPO.

BAIC has hired investment banks including Goldman Sachs Group and UBS for the share sale, probably in Hong Kong, Xu said. Mercedes's growth in China, the world's largest automotive market, had been hampered by a distribution structure that split deliveries of locally made and imported vehicles.

The carmaker combined the sales units last December. In August, Daimler said it will invest 2 billion euros ($2.7 billion) to double local production to more than 200,000 vehicles.

Automotive News Europe contributed to this report

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