General Motors and Sichuan Tengzhong Heavy Industrial Machinery Co., Ltd (Tengzhong) have entered into a definitive agreement that will allow Tengzhong to acquire GM’s HUMMER brand.
Tengzhong intends to purchase HUMMER through an investment entity, in which it will hold an 80% stake. Mr. Suolang Duoji, a private entrepreneur with holdings that include the Hong Kong-listed thenardite producer Lumena, will hold the remaining 20% stake. Financial terms of the agreement were not disclosed.
Under the terms of the definitive agreement, the buyer will acquire the ownership of the HUMMER brand, trademark and tradenames, as well as specific IP license rights necessary for the manufacture of HUMMER vehicles. It will also assume the existing dealer agreements relating to HUMMER’s dealership network.
Under the agreement, HUMMER would contract vehicle manufacturing, key components and business services from GM during a defined transitional time period. For example, GM’s Shreveport assembly plant would continue to contract assemble the H3 and H3T and AM General’s Mishawaka assembly plant will continue to assemble the H2. Both facilities will produce the specified vehicles until June 2011, with an optional one year extension until June 2012.
Once the transaction is complete, HUMMER will become the first automaker to offer an alternative fuel powertrain in every model, with the addition of E85 FlexFuel capability in the 2010 H3 and H3T. HUMMER is also in the process of obtaining emissions certification for a diesel H3 that will be introduced in markets outside of North America. The brand’s future product development will focus on improving efficiency and performance in current HUMMER models with alternative fuel powertrains, more efficient gas engines, 6-speed transmissions and diesel engines.
Credit Suisse is acting as exclusive financial advisor and Shearman & Sterling is acting as international legal counsel to Tengzhong on this transaction. Citi is acting as financial advisor to GM.
Tengzhong is one of China’s major privately owned engineering companies. Tengzhong is a manufacturer of heavy machinery equipment with a presence in special-use vehicles, road and bridge construction equipment and construction and energy industry equipment.