Daimler looks to invest in China's BAIC Motor this year: sources

FRANKFURT/MUNICH Fri Jan 18, 2013 2:30pm GMT

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FRANKFURT/MUNICH (Reuters) - Daimler (DAIGn.DE) wants to buy a stake in the car unit of its Chinese partner BAIC Group BEJINS.UL this year as part of a drive to bolster its sagging position in the country, two sources close to the plans said.

"The investment will come ahead of the planned IPO (initial public offering) of BAIC Motor, and Daimler is set to be the only automotive anchor investor," one of the people said.

BAIC is planning to take its BAIC Motor unit public in late 2013 or in 2014 and Daimler - owner of luxury marque Mercedes-Benz - could take a stake of roughly 10 percent ahead of that flotation, giving it greater exposure to the Chinese market, the sources said.

"Daimler would benefit from the potential rise of the shares in the IPO, while BAIC Motor would be able to present a strong anchor investor, which may help attract other investors," the person said.

China has become Mercedes-Benz's No. 3 market after the United States and Germany, but the carmaker has fallen far short of its two larger rivals BMW (BMWG.DE) and Audi, part of Volkswagen (VOWG_p.DE), in terms of vehicle sales there.

Daimler is also seeking a board seat at BAIC Motor, but talks on the topic have not been concluded yet, the person said.

Daimler declined to comment, while BAIC, China's fifth- largest automaker, was not immediately available.

Under partnerships with Daimler and Hyundai Motor (005380.KS), BAIC makes Mercedes and Hyundai-branded cars for sale in China and also builds the E150 small car that it sells under its own brand.

In 2009, China overtook the United States as the world's largest auto market by volume, but Chinese automakers still rely heavily on locally-made foreign brands.

According to the sources, Daimler has been in talks with the country's sovereign wealth fund China Investment Corp CIC.UL - which already owns roughly 1 percent of Daimler's shares - about a possible hike of the fund's investment.

The talks, which took place in the summer of last year, are not ongoing currently, one of the people said.

Daimler's Chief Executive Dieter Zetsche told reporters on the sidelines of an event in Munich on Thursday that he had only read about the CIC topic in newspapers. "Other than that, I have no information," he added.

(Reporting by Arno Schuetze, Edward Taylor and Irene Preisinger; Editing by Mark Potter)

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