Feb. 26 (NBD) -- Chinese carmaker Zhejiang Geely Holding Group (Geely) acquired a 9.69 percent stake in Merceded Benz's owner Daimler AG (Daimler), which has caused a stir in the automotive industry. 

The 9.69-percent stake is worth about 9 billion U.S. dollars at Daimler's current share price, and will make the Hangzhou, Zhejiang-based company the biggest shareholder of Daimler. 

The company's source of funds, accordingly, has drawn wide attention. 

According to reports, Geely's Chairman Li Shufu will travel to Germany next week to meet Daimler executives for a negotiation. 

A source with Geely told NBD that his company will announce the composition of funding in due course.

A report by Financial Times said Bank of America provides consulting services to the Chinese carmaker in the transaction. Another source with knowledge of the matter said that the purchase will be proceeded via equity collar. 

Cao He, Chairman of ZhongRong Venture Capital Fund Management Co., told NBD that the Daimler stake purchase needs a large sum of money, which will place great pressure on Geely. Equity collar is similar to bridge loan, allowing the acquirer to pledge its stake in the acquired unit to a bank for money. Such a way can help the acquirer remain its shareholder status even though it doesn't directly have any share in hand. 

Many powerful investment banks would like to employ such model, and might have signed agreements with Geely before the acquisition, Cao said. They can make profits by offering financial solutions ranging from the amount of shares to buy to the way of purchase or lending money to Geely, and the carmaker can get money to complete its deal. 

In an interview with CCTV-2, Li Donghui, executive vice president and chief financial officer at Geely, said the purchase will be conducted through Geely's overseas subsidiary, and the funds will be raised overseas through stock equity and other financial products. 

Regarding the specific amount of money Geely has to take out of its pocket, Li refused to tell, but said the sum is far below 9 billion U.S. dollars. 

Some media outlets speculated that Geely needs to raise around 2.25 billion U.S. dollars in addtion to the stock-pledged fund to complete the transaction, but the company didn't confirm.

Industry insiders say that Geely will benefit a lot if it buys the stake through above-mentioned ways. In addition to the benefits in the technology and brand respect, the company will make big bucks due to Daimler's striking performance at the capital market. 

According to Daimler's financial report for 2017, the German carmaker obtained revenue of 164.3 billion euros (203.8 billion U.S. dollars), up 7 percent year on year. Earnings before interest and tax jumped 14 percent to 14.7 billion euros (18.2 billion U.S. dollars). Net profits soared 24 percent to 10.9 billion euros (13.5 billion U.S. dollars). Dividend per share was 3.65 euros (4.5 U.S. dollars), up 12 percent year on year. On this basis, Geely will get a dividend of more than 450 million U.S. dollars for a year after the completion of the transaction. 

It is noticeable that Geely's move arouses concerns of Swedish truck maker AB Volvo. 

On December 27, 2017, Geely acquired a 8.2 percent stake in AB Volvo. The purchase makes the Zhejiang-based carmaker the largest shareholder of AB Volvo with 15.6 percent of voting rights. 

A source close to the negotiation revealed that AB Volvo has been objecting to Geely's stake purchase in Daimler over antitrust concerns, as Daimler is one of the world's largest commercial truck sellers and commercial vehicle is one of the core businesses of AB Volvo. 

However, the source said Geely doesn't want the controlling right of Daimler, and it is just one of the German carmaker's investors.  

Email: lansuying@nbd.com.cn