Huawei's new smart car firm valued up to $35 bln amid advanced stake talks -sources

Seres Therapeutics

29/11/2023 11:45

(Adds comment from Huawei)
    By Julie Zhu and Zhuzhu Cui
       HONG KONG/SHANGHAI, Nov 29 (Reuters) - Huawei
Technologies'  HWT.UL  new smart car software and components
firm is set for a valuation of up to 250 billion yuan ($34.67
billion) after it sells stakes to investors including Changan
Auto, three people with knowledge of the matter said.
    The Chinese company said on Sunday it will spin off its
four-year-old Intelligent Automotive Solution (IAS) business
unit - which aimed to become the equivalent of German automotive
supplier Bosch of the intelligent electric vehicle (EV) era -
into a new company which will receive the unit's core
technologies and resources.
    Main auto partner Chongqing Changan Automobile  000625.SZ 
and relevant parties will own up to 40% of the new firm, a
Changan Auto statement showed on Sunday. Neither Changan Auto
nor Huawei disclosed financial details.
    Changan Auto and its ultimate parent, state-owned China
Ordnance Equipment Group - also known as China South Industries
Group - are considering acquiring about 35% and 5% respectively
of the new firm, which could be valued at 200 billion to 250
billion yuan, two of the people said.
    Potential minority shareholders include state-owned
automakers FAW Group  SASACJ.UL  and Dongfeng Motor Group
 0489.HK , which are also in advanced talks with Huawei to
acquire up to 5% each, said the three people.
    Huawei will likely remain the single largest shareholder
with 40% to 50% for at least the next two-to-three years, said
two of the people.
    Deal details - notably the ownership split and valuation -
have not been finalised and are subject to change, the three
people said. The transaction will also be subject to regulatory
approval, said one of the people as well as a fourth person with
knowledge of the matter.
    The people declined to be identified as the matter is
private.
    Changan Auto referred Reuters to its Sunday statement and
declined to comment further. 
    Huawei confirmed it is in advanced talks to sell part of its
new smart car firm to a number of investors including Chongqing
Changan Automobile, but did not comment on the valuation. 
    It added that it wanted to move technologies and resources
into a new company to work with partners to promote innovation
in smart car technology and promote the development of the
automotive industry. It did not comment further.
    The other companies involved did not immediately respond to
requests for comment. 
    The spin-off is rare for Huawei whose businesses including
telecommunications and consumer electronics have been owned by
founder Ren Zhengfei and close to 100,000 shareholding employees
since the firm's 1987 founding. In 2020, a year after it was
subjected to U.S. sanctions on security grounds, it sold budget
smartphone brand Honor to keep the brand alive.
    Three of the people said one reason for the planned sale is
that Huawei has struggled to grow the smart car business and
needs to recoup capital to cover research and development (R&D)
spending.
    Huawei senior executives including Ren initially pinned high
hopes on the unit to be a new growth driver, said the people.
    It has invested $3 billion in the unit since its inception
and grown its R&D team to 7,000 people, showed the company's
2022 annual report. 
    Ren did not respond to a Reuters query via the company.
    But it was the only money-losing unit among Huawei's main
six and brought in one billion yuan revenue in the first half of
2023, a fraction of the company's 310.9 billion yuan total,
Huawei said in August.
    Huawei has partnerships with other auto companies, including
Seres Group  601127.SS  and Jianghuai Automobile  600418.SS , as
well as with Changan Auto involving EV brands Avatr and Deepal.
    The new firm - which Huawei has said will engage in R&D,
production, sales and service of intelligent automotive systems
and component solutions - will also absorb the group's other
auto-related assets and resources outside the IAS business unit,
said one of the three people.
    Huawei is considering locating the new firm's headquarters
in Chongqing, a sprawling southwestern municipality where
Changan is based, said two of the people. The unit is currently
headquartered in Shanghai.
    The proposed deal will also smooth the way for the business'
listing, as Huawei had planned, said two of the people.
    Richard Yu, head of Huawei's consumer business and who has
overseen the smart car unit for years, is unlikely to lead the
new firm, one of the people said without elaborating.
    ($1 = 7.2111 Chinese yuan renminbi)

 (Reporting by Julie Zhu and Zhuzhu Cui; Additional reporting by
David Kirton; Editing by Brenda Goh and Christopher Cushing)
 ((julie.zhu1@thomsonreuters.com;))