Saab China: Deal to sell Saab to Youngman & Pang Da is already in trouble

Will GM stop the sale of Saab to China?

Only days after Saab announced it had accepted a takeover offer from China’s Youngman and Pang Da, GM casts doubt on its viability.

The initial deal Victor Muller seemed to have brokered with Youngman and Pang Da was to sell a majority stake in Saab for €245 million but leave Victor Muller in charge.

It seemed the Chinese went along with that scenario, but bided their time until things got really rough for Saab. Then they struck with an offer to buy Saab lock, stock and barrel.

Despite an initial refusal from Victor Muller to let go at Saab, he ultimately had to capitulate and accept the only realistic offer on the table. Deal done. But not quite.

Any deal to sell Saab to anyone is subject to approvals from a raft of authorities around the world, thanks to the complicated mess Saab has created round its ownership and finances.

The Swedish Debt Office and the European Investment Bank (EIB) need to approve any deal, thanks to a huge loan from the EIB to Saab underwritten by the Swedish Government. If they think Saab’s putative owners are good for the money – and let’s face it, almost anyone is probably better for the money than Saab – then no problem. But more of that in a moment.

Also with a vested interest – and a big wodge of Saab preference shares – is General Motors, who sold Saab to Victor Muller’s Spyker in the first place. And that is potentially the biggest problem.

GM has a partnership deal with China’s largest car maker, SAIC. and therein lies the problem. Allowing Saab to be sold to Youngman and Pang Da would give them access to much of GM’s technology, and allow them to compete head-on with GM and SAIC in China with identical technology. Which we can’t see GM stomaching.

GM spokesmen, Jim Cain, has already voiced GM’s opinion on this. He said:

GM would not be able to support a change in the ownership of Saab which could negatively impact GM’s existing relationships in China or otherwise adversely affect GM’s interests worldwide

Which, short of coming out and actually saying GM will block the sale of Saab to Youngman and Pang Da, comes as close as we’re likely to get at this stage to saying this deal can’t happen.

Also at issue, as we alluded to earlier, is the financial strength Pang Da and Youngman can muster to leverage their assets to fund the recovery and growth at Saab.

We knew that Pang Da had raised close to $1 billion earlier this year when it floated in China. But reports from China now say that Pang Da’s latest reports show that it’s already spent all that money, and is planning a bond float to raise a further $600 million.

The consensus seems to be that Pang Da has burnt through its cash pile by underwriting finance deals for its customers to buy cars. If that’s the case, the money will come back over time – but it’s all far from clear. Pang Da has also reported profits down by over 10 per cent, probably as a result of China’s decision to make finance more difficult in an effort to curb inflation.

All of which muddies the waters in the Saab deal considerably, but the biggest obstacle to a sensible conclusion must be GM.

There’s still a very long way to go.