FB Pixel no scriptBAIC Group to take over Luckin chairman's shares in auto-rental company CAR Inc. | KrASIA

BAIC Group to take over Luckin chairman’s shares in auto-rental company CAR Inc.

Written by Wency Chen Published on   2 mins read

UCAR would divest its entire equity in CAR Inc. if the deal closes.

China’s largest car rental firm CAR Inc. (HK:0699), chaired by Charles Lu Zhengyao who is also chairman of scandal-plagued Luckin Coffee Inc. (NASDAQ: LK), announced on Monday that Lu’s ride-hailing company UCAR is set to sell its 21.26% stake in CAR Inc. to Beijing Automotive Group (BAIC Group), suggesting Lu’s intention to cash out of his assets.

According to CAR’s filing submitted to the Hong Kong Stock Exchange, UCAR (OC: 838006) entered into a non-legally binding strategic cooperation agreement with state-owned automaker BAIC Group on May 31. The latter, who is the German automaker Daimler’s main joint venture partner in China, will acquire no more than 450.8 million shares of CAR from UCAR.

CAR’s share price plunged more than 50% from HKD 4.30 (USD 0.55) to HKD 1.96 (USD 0.25) on April 3, after coffee company Luckin exposed its sales fraud, because of the association between the two firms. Charles Lu is one of Luckin’s early investors and chairman while Luckin ex-CEO Jenny Zhiya Qian was a former chief operating officer at both CAR and UCAR.

CAR’s stock has surged by 24.4% to HKD 2.24 (USD 0.29) since the deal was announced.

Before the cooperation with BAIC Group, Amber Gem Holdings Limited, a private equity subsidiary of Warburg Pincus which previously owned a 10.11% stake in CAR, made an agreement with UCAR on April 16 to purchase up to 17.11% shares of CAR over two separate transactions. However, the transaction was terminated on May 30.

For the first quarter of 2020, CAR’s total revenue declined 28.3% year-on-year (YoY) to RMB 1.3 billion (USD 182.99 million) while the company reported a net loss of RMB 188 million (USD 26.46 million), down 148.2% from the same period in 2019, amid the struggling car-rental industry.

As of March 31, the company’s total cash balance was RMB 3.3 billion (USD 464.52 million), while it had total debt of RMB 11.7 billion (USD 1.65 billion).

In the latest announcement, the company stated that “The Strategic Cooperation Agreement is non-legally binding in nature and there is no assurance that the formal agreement will be entered into,” adding that the specifics of this cooperation are still under negotiation.


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