May 25 (Bloomberg) -- Shanghai Automotive Industry Corp. said it has approved selling back to General Motors Co. 1 percent ownership in their joint venture for $91.4 million.
SAIC disclosed terms of the deal, which included yearly interest of 4.86 percent, today on the Shanghai Stock Exchange website. SAIC’s board approved the transfer on May 24, Lori Arpin, a spokeswoman for GM, said today in an e-mail.
The deal, which still requires Chinese government approval, restores GM’s ability to have equal say on operational decisions in China, three years after it ceded control of the venture by selling a 1 percent stake for $85 million. GM, which sold more vehicles worldwide than any other carmaker last year, wants to almost double deliveries in China to 5 million vehicles by 2015.
The two partners said in April they were close to a deal, where Shanghai GM would first be split into two. Both partners would hold equal stakes in the operations unit, while SAIC retains a 51 percent majority in the sales arm. That allows the Chinese company to include the venture’s revenue in its financial statements, the companies said in April.
Adam Jonas, an analyst with Morgan Stanley, said at the time that GM’s ability to regain equal control of its passenger-vehicle manufacturing venture would be an “extremely important” development helping GM roll out global platforms and coordinating product strategy. The deal would also pave the way for the two partners to deepen ties and enhance GM management’s credibility, Jonas wrote in an April 19 report.
GM, whose first-quarter profit slid 61 percent as losses at its European unit widened, increased deliveries in China 9.4 percent to 972,369 vehicles during the first four months of the year.
The partnership began with equal ownership between the two companies. GM sold its stake in Shanghai GM as the Detroit-based parent dealt with its 2009 bankruptcy reorganization in the U.S.
GM officials have said there was an agreement at the time to transfer back ownership. GM Chief Executive Officer Dan Akerson in August said the automaker expected to eventually buy back the stake.
GM rose 1.8 percent to $22.44 at the close in New York. The shares have gained 11 percent so far this year.
To contact the reporter on this story: Tim Higgins in Southfield, Michigan at firstname.lastname@example.org
To contact the editor responsible for this story: Jamie Butters at email@example.com