HONG KONG: Shares in Geely Automobile Holding Ltd, the listed unit of China's largest privately owned carmaker, momentarily jumped over 9 percent to an all-time high yesterday on speculation that its parent group is close to sealing an acquisition deal with Ford Motor's Swedish brand, Volvo.

Geely shares rose as much as 9.3 percent to HK$4.24 before closing at HK$4.11, up 5.92 percent after investors sold their holdings to lock in profits.

Worries on the funding of Geely Holding's Volvo deal abated when at least three banks agreed on Tuesday to extend loans to the Zhejiang-based company. This marks a big step forward in the mainland carmaker's long-awaited acquisition.

Bank of China, China Construction Bank Corp and Export-import Bank of China agreed to extend loans to Geely Holding, Geely Automobile's parent company, to finance the purchase from Ford Motor. The loans are expected to have a five-year tenor.

Ford Motor and Geely have not disclosed a possible sale price for the Volvo deal yet, but Reuters said Geely may pay around $2 billion, even though Ford spent $6.45 billion to acquire Volvo in 1999.

So far, no foreign banks are involved in the deal, but analysts say it is possible Geely may tap one or two foreign banks for some lending contribution. Standard Chartered and HSBC Holdings are Geely's principle banks, according to the company's financial reports.

Shares in BYD, China's largest home-grown carmaker, also increased 4.6 percent in the earlier trading session yesterday but closed 0.94 percent lower to HK$73.4.

Like Geely, BYD is also looking to expand internationally by enhancing their technological know-how and building more attractive models.

Helped by government subsidies, the Chinese car market overtook the US as the world's largest earlier this year.

Geely has been eyeing the Ford Motor's Swedish brand Volvo since the end of last year when the Detroit-based automaker said it is eager to sell its loss-making Volvo to stay afloat amid the economic recession. Ford Motor picked Geely as the preferred bidder for Volvo late October this year.

Geely said last week that it had reached an agreement with Ford on intellectual-property rights involving Volvo, which had been a key stumbling block for a possible acquisition. However, the timing of any final deal remains unclear.

In September, investment bank Goldman Sachs invested $334 million in Geely Automobile, although Geely said Goldman's money would mainly support its domestic car plant expansion.

(HK Edition 12/03/2009 page4)