Shanghai Automotive Industrial Co. (SAIC) is preparing to submit plans to acquire British car maker MG Rover in the next few days, British chancellor Gordon Brown said, according to the Associated Press (AP).
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AP noted his comments came as he ended a visit highlighting the British government’s eagerness to boost trade and other cooperation with China.
During his three-day visit, Brown reportedly expressed support for China’s currency policies, agreed with Beijing on reforming international financial institutions and pledged help for the country’s developing financial markets.
On Tuesday, according to the report, Brown said Shanghai Automotive planned to present a joint venture feasibility study with MG Rover Group in the next few days.
The Shanghai automaker, which has major joint ventures in China with General Motors and Volkswagen, reportedly plans to invest up to £1 billion pounds ($US1.9 billion; €1.4 billion) in a 70% stake in Rover.
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By GlobalDataThe Associated Press noted that SAIC, China’s largest state-run automaker, has refused to comment on the deal.
AP said the acquisition requires approval from the Shanghai city government, SAIC’s controlling shareholder, and the National Development and Reform Commission – a Cabinet-level agency in charge of economic policy.
SAIC signed a cooperation agreement with Rover in June and Brown reportedly told journalists that Chinese officials he met with in Beijing were enthusiastic about the planned acquisition.
The Associated Press noted that the British government, keen to avoid more job losses ahead of an upcoming general election, is hoping the deal would help preserve employment for 6,000 Rover workers. Brown reportedly said he hadn’t seen SAIC’s study, and didn’t know if it entails any layoffs.
“I think both the government of China and the British government welcome the idea of this proposed alliance,” he told the Associated Press, refusing to comment further.
“Rover is a private company, and these are commercial negotiations, and it’s not for this government to comment on them at a sensitive time,” Brown added, according to AP.
Separately, the Daily Telegraph said Shanghai Automotive’s business plan, for approval by Beijing, was agreed only after the parties hammered out tax breaks worth tens of millions of pounds with the UK Customs & Excise.
Brown told the newspaper that negotiations had taken place between MG Rover and Customs & Excise on whether the car company would be able to benefit from “flexibility” in the rule-book. A spokesman reportedly said the date of the next election was “not a factor” in the deal.
The Daily Telegrpah said it understood Shanghai Automotive was worried about being faced with a huge bill for unpaid VAT, and that the “flexibility” amounts to deferring payments of several tens of millions of pounds.
A Customs & Excise spokesman declined to comment to the newspaper on MG Rover nor to say how such deals work.
A spokesman told the Telegraph: “We can’t comment because of taxpayer confidentiality.”
However Stuart Hindle, a tax partner at KPMG, told the newspaper that Customs & Excise only agrees such “time to pay” agreements when the VAT bill has been amassed due to some unforeseen circumstances – typically, the bill is paid off in three months’ time after interest of between 6% and 7% has been charged.
MG Rover communications director Daniel Ward told the Daily Telegraph: “We are very confident. We wouldn’t envisage it taking three months – we would expect it to go through faster than that. It’s a true business plan. That’s why it has taken some time to put together. It covers how we will run the business with Shanghai Automotive.”
It included details of the financing of the business, and models it will make, the paper noted.
Noting that the MG Rover and SAIC will form a joint venture which is likely to be 70% controlled by Shanghai Automotive, the Daily Telegraph added that reports in Chinese papers on Tuesday said a second state-owned firm, Nanjing Automotive, might also be brought in on the deal, possibly taking a 20% share.
Production of Rover models, including a new Rover 45, will be shared between Shanghai and the existing Rover plant in Longbridge, Birmingham, which will almost certainly be scaled down, the paper added.
