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Tengzhong confident on Hummer deal

By Li Fangfang (China Daily)
Updated: 2009-06-12 10:17

China's Sichuan Tengzhong Heavy Industrial Machinery Co Ltd, which shot to fame in the past week for its controversial takeover bid of iconic off-road sports utility vehicle (SUV) brand Hummer, said it has the financial resources and expertise to clinch the deal.

"The mergers and acquisitions we did in the recent years have provided us with rich experience to integrate resources in different industries or tap into a new industry," said Yang Yi, general manager, Tengzhong.

"What I have to stress is that we are not planning to be involved in the daily operations of Hummer. We have full confidence in Hummer's current management team," Yang said.

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The virtually unknown heavy machinery maker based in Chengdu, capital of Sichuan province, signed a preliminary agreement with the bankrupt General Motors to acquire its Hummer brand for an undisclosed price.

"The public should not judge a private company's financial capability from its registered capital. We have the financial resources for the Hummer deal from our own capital and also funding from some financial institutions," said Yang.

He also disclosed for the first time that Tengzhong is a company held by "several private investors".

Tang refused to disclose any details on the exact quantum of money that the company would spend on the Hummer deal. Dodging queries that the deal size was between $100 million and $500 million, Yang said, "it would be a very worthy deal with a reasonable price."

Credit Suisse, Tengzhong's financial advisor for the deal, also refused to disclose any information about the financial status with China Daily.

Yang said the final result will be known in the next few weeks. The transaction is also awaiting approval from the government.

Zhong Shi, an independent auto analyst, said that "it is unworthy to buy Hummer for $500 million. A $100 million deal would be a better fit."

"Tengzhong, Hummer and GM are now programming the future of Hummer, including its manufacture and product portfolio," said Yang.

As part of the transaction, Tengzhong said it will sign a long-term contract with GM on the assembly, spare parts and material supplies for the transferred Hummer.

Yang said that Tengzhong would also invest in research and development of a new powertrain system to help improve the gas guzzler's fuel efficiency.

Yang also reiterated that Tengzhong has no plans to move the Hummer manufacture to China.