GAC to issue shares for stake in FAW's unnamed carmaking JV

A letter of intent signed Monday would turn China FAW into GAC's second-largest shareholder, with outside observers pointing to FAW Toyota as the likely target venture.

GAC Group has signed a letter of intent with China FAW under which the Guangzhou-based automaker plans to issue new shares to buy part of FAW's holding in a vehicle-manufacturing joint venture, alongside a supporting fundraising. The two state-owned carmakers kept the venture's name under wraps, explaining only that it involves an overseas-listed company. Since each group operates its own Toyota partnership, market watchers suspect the target is FAW Toyota, though GAC has not confirmed this.

Once the deal closes, FAW would rise to become GAC's second-largest shareholder, creating an equity tie between a centrally administered SOE and a locally controlled one. GAC noted the arrangement will count as a major asset restructuring and a related-party transaction, but its ultimate controller stays the same and it is not a backdoor listing.

GAC's Shanghai shares were halted on Monday and will remain suspended for up to 10 trading days while the company finalizes a board-approved restructuring proposal, after which it will seek to resume trading. The automaker cautioned that the plan is still at a preliminary stage and may not be completed. Before the halt, the stock quoted at 5.09 yuan, down about 38 percent this year.

The transaction lands as Beijing renews its push for auto-industry consolidation. At a September 11 briefing, an NDRC official said China would back large corporate groups in pursuing mergers and encourage leading players to pool R&D and production resources to reduce duplicative competition.