Didi Guns For EV Stake After Drubbing From Beijing Regulators
Didi is in talks with state-backed Sinomach Automobile to buy a third of its electric vehicle operation, indicating that the ride-hailing company's regulatory issues are behind it as it concentrates on growth, Julie Zhu reported for Reuters.
Photo Insert: Didi shares surged 8% in pre-market trading following the report.
If completed, the transaction will help Didi Global Inc accelerate its strategic expansion in the world's largest EV market and mitigate the pandemic's impact on its main ride-hailing business.
Didi has been obliged to pursue a delisting from New York and rein down its activity due to scrutiny from Beijing for potential data security violations, although there are hints of a thaw.
The Wall Street Journal reported on Monday that the company's investigations are nearing completion.
According to the report, Didi wants to buy minority owners' interests in Sinomach Zhijun Automobile and infuse new funds into the company. A stake of such size would cost Didi more than 1 billion yuan ($150 million). Negotiations for a stake in Sinomach Zhijun are far advanced.
The two sides have given themselves until the end of the month to finalize the agreement, which will see Didi become the EV maker's second-largest stakeholder behind Sinomach Automobile.
According to the corporate registry, the parent and its related entities own a combined 67 percent of Sinomac Zhijun.
"The (reported) deal talks between Didi and Sinomach have sent positive signals to the market," said Zhang Zihua, chief investment officer at Beijing Yunyi Asset Management.
"Firstly, it means the regulatory crackdown which forced Didi to delist from the US and banned its apps in China would probably come to an end. Secondly, being tied up with a state-backed automaker would also help Didi's relisting plans in the Greater China region in the future," added Zhang.
Didi shares surged 8% in pre-market trading after the Reuters report.