Chinese ride-hailing giant UCar, owned and controlled by Luckin Coffee co-founder Charles Lu, has agreed to sell its stake in one of the country's largest vehicle rental companies, Car Inc, to BAIC Group. UCar announced that it will be selling its 20.9 percent stake in Car Inc to BAIC Group for HK$1.4 billion, or roughly $180.6 million.
The deal will include the transfer of no more than 443 million Car Inc shares to BAIC Group's subsidiary company Jiangxi Jinggangshan BAIC Investment Management. BAIC Group will be purchasing the shares at a price of HK$3.10 per share, slightly higher than the share's HK$3.06 closing price on Friday.
The price paid for the shares is roughly 86 percent lower than its peak of HK$22 per share back in May 2015. UCar mentioned in a statement that it plans to use the proceeds of the stake sale to repay some loans that were secured against its stock. It added that the sale is part of its wider strategy to optimize its debt structure.
BAIC Group had initially backed out from purchasing the 443 million Car Inc sales early last month after UCar stated that SAIC Motor Corporation, another state-owned automotive firm, had won the bid to purchase the stake. SAIC had reportedly agreed to acquire the stake along with the additional purchase of 170 million shares from Amber Gem, a subsidiary of Warburg Pincus.
Due to a disagreement over the terms of the deal, SAIC Motor eventually decided against the stake acquisition. Following the announcement of the stake sale, Car Inc's shares had dropped by a further 4.9 percent on Tuesday, before trading was suspended.
The deal is still reportedly subject to an internal decision-making procedure at UCar along with other relevant approvals from the government and regulators. UCar reportedly plans to hold a shareholder's meeting in August in Beijing to further discuss the stake sale.
Similar to other transport companies, Car Inc had been severely affected by the spread of the coronavirus pandemic. For its first quarter this year, the company reported a net loss of over 187.7 million yuan, or roughly $26.9 million. This was a stark contrast to the 390 million yuan net profit it had reported over the same period last year.
The company's stock price has also suffered, fluctuating wildly over the past several months. Car Inc's stocks dipped in April and May after the Luckin Coffee scandal erupted. It eventually surged by more than 20 percent in June and July after reports had spread that it would likely be acquired by either BAIC or SAIC.
