Geely to reorganise Zeekr, Lynk units as founder, investors extract US$2 billion

Name: SCMP
Telephone: +852-2680-8888

Zeekr loses 24 per cent in New York trading after announcement of Geely Auto reorganisation plan

Reading Time:3 minutes

Why you can trust SCMP

Billionaire founder Li Shufu is reorganising his EV empire amid stiffer competition at home and overseas. Photo: Xinhua

Daniel Renin ShanghaiandYujie Xuein Hong Kong

Published: 9:05am, 15 Nov 2024Updated: 4:30pm, 15 Nov 2024

Li Shufu, the billionaire who controls one of China’s biggest electric vehicle (EV) makers, is consolidating his business under his Hong Kong-listed flagship Geely Auto. He and his associates will extract more than US$2 billion by selling their stakes in the process.

Geely Auto has agreed to buy an 11.3 per cent stake in New York-listed Zeekr Intelligent Technology for US$806.1 million or US$26.87 per share, according to a stock exchange filing on Thursday. The purchase will raise its stake to 62.8 per cent. The seller is a company ultimately owned by Li and his associates.

Separately, Zeekr said it will buy a 50 per cent stake in car maker Lynk & Co for 9 billion yuan (US$1.24 billion) from two entities related to the tycoon. It will also buy additional new shares in Lynk to raise its stake to 51 per cent, diluting Geely Auto’s stake to 49 per cent.

Li Shufu is simplifying the group’s shareholding structure under Hong Kong-listed flagship Geely Auto. Photo: AFP

Geely Auto fell 5.2 per cent to HK$13.18 on Friday, erasing HK$7.3 billion (US$931.6 million) from its market value. Zeekr, which got listed via a stock offering in May, sank 23.7 per cent to US$22.24 in New York trading overnight, lopping US$1.7 billion off its market capitalisation.

Zeekr and Lynk remained unprofitable, according to their most-recent financial reports.

“Zeekr and Lynk bear similarities in product line-up and price ranges, which will inevitably lead to [unnecessary] competition, internal conflicts and waste of capital if they are not integrated,” Gui Shengyue, CEO of Geely Auto said during an earnings call on Thursday. “Cross-competition between the two brands hinders Geely’s development.”

The Zeekr acquisition shows the group’s support for the brand, Geely Auto said in its filing. It will simplify Zeekr’s shareholding structure, enhance the group’s influence over its business direction and facilitate allocation of strategic resources and future plans, it added.

Li is reorganising his Hangzhou, Zhejiang-based empire amid excess capacity in the industry and a cutthroat price war among domestic EV producers. Efforts to expand overseas have been met with punitive tariffs on China-made EVs in the US and Europe. Donald Trump’s US election victory has cranked up pressure on Chinese exports.