HONG KONG/SHANGHAI, Nov 29 (Reuters) – Huawei Technologies Co Ltd’s (HWT.UL) new smart car software and parts company could fetch up to 250 billion yuan (34.67 billion yuan) after selling stakes to investors including Changan Automobile. Three people familiar with the situation have revealed that the expected valuation will be $1,000,000.
The Chinese company on Sunday spun off its four-year-old Intelligent Automotive Solutions (IAS) business unit, which aimed to be the equivalent of German auto parts supplier Bosch in the era of intelligent electric vehicles (EVs), into a new company. announced that it would be established. This provides the unit’s core technology and resources.
Major automotive partner Chongqing Changan Automobile (000625.SZ) and related parties will own up to 40% of the new company’s shares, Changan Automobile said in a statement on Sunday. Neither Changan Auto nor Huawei have disclosed financial details.
Changan Automobile and its ultimate parent company, state-run China Weapons Equipment Group (also known as China South Business Group), are considering acquiring approximately 35% and 5% of the new company, respectively, at a valuation of between 200 billion and 250 billion yen. It could be worth 100 million yuan. Two of them said.
According to three people familiar with the matter, potential minority shareholders include state-owned automakers FAW Group (SASACJ.UL) and Dongfeng Motor Group (0489.HK), each of which could acquire up to 5% stake. The company is said to be proceeding with discussions with Huawei for the future.
Huawei is likely to remain the company’s largest single shareholder, with a 40% to 50% stake, for at least the next two to three years, two people familiar with the matter said.
Details of the transaction, particularly the ownership split and valuation, have not yet been finalized and are subject to change, the three people said. The deal would also require regulatory approval, one of the people and a fourth person familiar with the matter said.
The people asked not to be named because the matter is private.
Changan Automobile referred to Sunday’s statement to Reuters but declined further comment.
Huawei confirmed that it is in advanced talks to sell part of its new smart car company to a number of investors, including Chongqing Changan Automobile, but did not comment on the valuation.
He added that he hopes to transfer technology and resources to the new company and work with partners to promote innovation in smart car technology and promote the development of the automotive industry. He made no further comment.
Other companies involved did not respond to requests for comment.
The spin-off is unusual for Huawei, which has owned telecommunications, home appliances and other businesses since its founding in 1987, owned by founder Ren Zhengfei and nearly 100,000 employees. In 2020, a year after being hit with U.S. sanctions on security grounds, the company sold its budget smartphone brand Honor to keep the brand alive.
Three of the people said one of the reasons for the sale plan is that Huawei is struggling to grow its smart car business and needs to recover capital to cover research and development (R&D) spending. said.
Huawei executives, including Mr. Ren, initially had high hopes that the division would become a new growth engine, the people said.
The company has invested $3 billion in the division since its founding and expanded its research and development team to 7,000 people, according to its 2022 annual report.
Ren did not respond to Reuters inquiries through the company.
However, the company is the only one in the red among Huawei’s six major divisions, and its sales in the first half of 2023 are 1 billion yuan, which is only a fraction of the company’s total sales of 310.9 billion yuan, Huawei said in August. It was announced on .
Huawei has partnerships with other car companies such as Ceres Group (601127.SS) and Jianghuai Automobile (600418.SS), as well as Changan Automobile, which owns the EV brands Avatru and Deepal.
Huawei announced that the new company will be engaged in research and development, production, sales, and service of intelligent automotive systems and component solutions, and will also absorb the group’s other automotive assets and resources outside of the IAS business unit. said one of the three people involved. .
Huawei is considering locating the new company’s headquarters in Chongqing, a vast southwest municipality where Chang’an is based, two people familiar with the matter said. The division is currently headquartered in Shanghai.
The proposed agreement will also smooth the path for Huawei to go public, as planned, two people familiar with the matter said.
Richard Yu, the head of Huawei’s consumer business who has long overseen the smart car division, is unlikely to lead the new company, one of the people said, without providing further details.
(1 dollar = 7.2111 Chinese Yuan)
Reporting by Julie Zhu and Zhuzhu Cui. Additional reporting by David Kirton.Editing: Brenda Goh and Christopher Cushing
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