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Ningbo Jifeng in talks to buy out German auto supplier Grammer

[FRANKFURT] Chinese supplier Ningbo Jifeng Auto Parts Co is in talks to buy out its 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).

Jifeng Auto, already Grammer's biggest shareholder with about a quarter of the stock, made an indicative proposal of 60 euros a share, the German company said in a stock exchange statement Tuesday. That's 17 per cent more than the stock's last closing price in Frankfurt. Jifeng Auto would also pay a 1.25 euro dividend per share.

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

Grammer made the statement after Bloomberg News reported the bid. 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.

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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. Grammer is about 19 per cent held by the Hastors' investment vehicles, according to data compiled by Bloomberg.

Jifieng Auto representatives couldn't immediately be reached for comment.

Analysts' median fair value for Grammer is 53.50 euros a share, according to the Amberg-based 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. It eventually failed after Jifeng Auto acted as a white knight and backed Grammer's management. The clash with the family resulted in a "noticeable drop in orders" as customers postponed purchases, Mueller said in an April 2017 interview.

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