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Chinese auto supplier Jifeng in talks to buy German partner Grammer AG

Frankfurt

NINGBO Jifeng Auto Parts Co affiliates are in talks to buy out partner Grammer AG in a possible deal that could value the German maker of vehicle seats at about 750 million euros (S$1.17 billion). Grammer stock rose the most in nine years.

The German manufacturer received an indicative proposal of 60 euros a share, Amberg-based Grammer said on Tuesday in a statement after Bloomberg News reported on the possible bid. That's 17 per cent more than the stock's closing price on Monday.

The prospective buyer would also pay a 1.25-euro dividend per share. Jifeng Auto, the listed Chinese supplier that's already Grammer's biggest shareholder with about a quarter of the stock, isn't directly involved in the talks, according to a representative.

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"At this stage it is uncertain whether the negotiations will be concluded successfully and a takeover offer will be launched," Grammer said, adding that it's "assessing strategic options in the best interest of the company".

Grammer sold a minority stake to Jifeng Auto in 2017 to defend against share purchases by the Bosnian billionaire Hastor family, investors who had been involved in an acrimonious supply dispute with carmaking giant Volkswagen AG.

The Hastors, through family investment vehicles, rank as Grammer's second-biggest stockholders with a combined 19 per cent stake, according to data compiled by Bloomberg.

The Jifeng Auto offer might not be enough to win over the Hastors, who would be more likely to seek 70 euros a share, Harald Eggeling, an analyst at Oddo, said by phone.

Grammer shares surged as much as 19 per cent, the steepest climb since April 2009, and were trading at 61.05 euros as of 9.11am in Frankfurt. Jifeng Auto shares declined as much as 1.7 per cent in Shanghai.

Jifeng Auto, controlled by the family of chairman Wang Yiping, is willing to grant wide-ranging guarantees in any business-combination agreement, people familiar with the matter said, asking not to be identified because the information is private. Final discussions were delayed after a range of issues emerged during talks on Monday, the people said.

Analysts' median fair value for Grammer is 53.50 euros a share, according to the German company's website.

The Hastors pushed at last year's annual shareholders' meeting to replace much of Grammer's leadership, including chief executive officer Hartmut Mueller. The move eventually failed after Jifeng Auto acted as a white knight and backed Grammer's management. While the clash with the family resulted in a "noticeable drop in orders" last year, Mr Mueller said in March that Grammer is likely to largely make up for the lost business.

Mr Wang told Bloomberg News a year ago that his company and Grammer were in the process of setting up joint ventures in China and discussing other potential cooperation projects and that further stake purchases were possible.

A move by the Ningbo-based head- and arm-rest manufacturer could revive concerns among Germany's leadership about Chinese investors' purchases of assets in Europe's biggest economy that were sparked by the 2016 purchase of robot maker Kuka AG by Midea Group Co.

Even so, a takeover could be endorsed by automakers. The Hastors' Prevent Group took the unprecedented step two years ago of halting component deliveries to Volkswagen because of an orders dispute.

Volkswagen last month reportedly cancelled all supplier contracts with that company as a result of the conflict. BLOOMBERG