Chinese FAW Group's talks to acquire Iveco held this year now on hold: sources

FILE PHOTO: The logo of China FAW Group Corp is pictured at the Auto China 2016 auto show in Beijing, China, April 26, 2016. REUTERS/Kim Kyung-Hoon

FRANKFURT/HONG KONG/SHANGHAI (Reuters) - Chinese state-owned car maker FAW Group held talks to acquire Italian truck group Iveco earlier this year but these have now been put on hold, two people close to the matter said.

FAW made a preliminary offer in July, valuing Iveco at a bit more than 3 billion euros ($3.5 billion), one of the sources said. The source said Iveco's parent CNH Industrial CNHI.MI rebuffed it because it considered the valuation low.

Changchun-based FAW, which makes heavy duty trucks under its own brand, is now reluctant to make international deals so as not to be seen to take advantage of troubled companies during the COVID-19 pandemic, the second source said. Some European governments have sought to shield key industries from unwanted foreign interest this year, as the coronavirus pandemic hit companies across sectors.

Vehicle and equipment maker CNH Industrial said last year it planned to split the company into two and list its lower-margin Iveco truck and bus business, along with the FPT engine division, in an effort to boost the group’s asset values and streamline its businesses but the plans have been delayed.

FAW, which also partners with Volkswagen AG VOWG_p.DE and Toyota Motor 7203.T to make passenger vehicles in China, declined to comment. CNH Industrial also declined to comment.

Iveco, which is the smallest of Europe's traditional truck makers, competes with the likes of Volkswagen, Daimler DAIGn.DE and Volvo Group VOLVb.ST. It makes vans in China with state-owned SAIC Motor 600104.SS.

A sale of Iveco would be an alternative to the planned spin-off initially aimed to be finalised in early 2021, but which has been delayed “into next year or beyond” due to the fallout of the coronavirus crisis, CNH Industrial said.

CNH industrial's top shareholder Exor EXOR.MI, the holding company of Italy's Agnelli family, has said it would be a significant shareholder in both entities following completion of a spin-off process. It declined to comment on the story.

Additional reporting by Giulio Piovaccari in Milan; Editing by Ana Nicolaci da Costa