Geely's electric vehicle US delisting is shrewd
HONG KONG, May 8 (Reuters Breakingviews) - Sometimes a U-turn is necessary. China's Geely Auto (0175.HK), opens new tab is offering, opens new tab to take electric-vehicle unit Zeekr (ZK.N), opens new tab private less than a year after the company's debut in New York. Absorbing the $6.4 billion entity will help Geely group founder Li Shufu extract synergies from his auto empire in an opportunistically timed deal.
The buyout proposal announced on Wednesday offers cash of $25.66 per Zeekr American Depositary Receipt, equivalent to a roughly 14% premium to the previous day's closing price. Geely Auto shareholders welcomed the deal; its Hong Kong-listed stock rose some 5% the following morning. They have multiple reasons to cheer on the transaction.
The broader Geely group and Li together hold multiple marques, from Volvo Cars (VOLCARb.ST), opens new tab to Lotus Technology as well as suppliers and even a satellite specialist. At least eight of those businesses are listed. As well as adding complexity, different brands risk cannibalising each other's markets and resources. In September, Li called for, opens new tab greater focus and efficiency.
The outlay looks manageable too. As Geely Auto, Li and Zeekr CEO An Conghui own more than 80% of the target company's stock, Geely would need to pay out just $1.3 billion to buy back the remainder. Geely Auto's net cash position should cover this. Its total spend could be even less if some investors opt instead for newly issued shares in the offeror.
The deal is affordable by other metrics too. It values Zeekr at 0.4 times estimated revenue for 2026, according to analyst estimates gathered by Visible Alpha – less than half the average for peers Nio (9866.HK), opens new tab, Xpeng (9868.HK), opens new tab and Li Auto (2015.HK), opens new tab. Although the offer is 22% above Zeekr's IPO price, the shares were trading as high as $32 a piece in mid-March. Here, Li may be able to thank U.S. President Donald Trump.
The deteriorating Sino-American relationship may have weighed on Zeekr's stock. It is one of only a handful of large U.S.-listed Chinese entities that do not have a listing in China or Hong Kong to fall back on should American lawmakers succeed in pressuring, opens new tab the U.S. Securities and Exchange Commission to delist Chinese companies.
Li will bear one big cost, however. Zeekr's abrupt change of strategic direction may leave investors wary of similarly sudden moves in the future. That could undermine his credibility when he attempts other listings, such as ride-hailing group CaoCao's planned Hong Kong IPO, opens new tab. For now, the Chinese auto tycoon is seizing the day.
Follow @KatrinaHamlin, opens new tab on X
Geely Auto on May 7 offered to take private its New York-listed electric vehicle unit Zeekr Intelligent Technology, valuing the company at $6.5 billion.
The Chinese parent offered to pay $25.66 per Zeekr American Depositary Receipt, a premium of about 14% to Zeekr's closing price on May 6. Zeekr ADS holders can also opt to receive 12.3 newly issued Geely shares.
Geely owns 65.7% of Zeekr. After the offer was announced, Zeekr shares closed the day's trade up nearly 12% at $25.19.
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