Geely confirms use of special options strategy in acquisition of Daimler

2019-01-15 11:13

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Chinese automaker Geely confirmed to the China Securities Journal Sunday that it adopted a special options strategy in its acquisition of German Auto giant Daimler AG last February.

In response to a rumor circulating recently that it has substantially decreased its shareholdings in Daimler, the stock price of which has been undergoing a sharp decline, Geely said that it adopted a special options strategy called collar options during the acquisition process to effectively avoid the risks originating from fluctuations in Daimler's stock price.

According to Geely, Daimler's stock price experienced an up to 20 percent fluctuation during the acquisition process. Thanks to the collar options strategy, Geely managed to smoothly complete the deal which lasted more than a year.

The company claimed that its acquisition deal with Daimler was the largest-ever cross-border acquisition deal where a Chinese company took over a foreign company using the collar options strategy.

On Feb. 24, 2018, Geely announced that it had acquired 9.69 percent of Daimler's shares which contains voting rights in a 9 billion U.S dollars acquisition deal, becoming the latter's largest single shareholder.

At that time, Geely said that as a strategic investor rather than a financial investor of Daimler, the company promised to hold its shares in Daimler for the long haul and help it grow into a leading player in global electric vehicle and online technical service markets.

Last Friday, the U.S. news outlet Bloomberg reported that Geely had cut its shareholdings in Daimler in half, which was later dismissed by Geely as fake news.

"As a long-term strategic investor and the largest single shareholder of Daimler, Geely has no plan to cut its shareholdings which will remain unchanged," the company declared in a statement.

As a result of a weakening profitability, Daimler's share price has plunged from 70 euros (80.28 U.S. dollars) to 48 euros (55.05 U.S. dollars) since Feb. 2018. 

Geely's share price also suffered significantly in 2018 with its market capitalization shrinking by over 170 billion H.K. dollars (21.69 billion U.S. dollars) since November 2017.
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