Kenon Finds Investor for China Auto Venture

Unnamed Chinese investor agrees to put $942 million into struggling Qoros

Qoros -Tian Tian - 29112011
The new Qoros model. Tian Tian

Kenon Holdings, the holding company controlled by Idan Ofer, is about to relieved of much of the burden of its money-losing Chinese automaker Qoros.

Shares of the holding company soared on Friday in New York after Kenon said a Chinese investor would inject 6.5 billion yuan ($942 million) into the struggling automaker. The brief statement revealed few other details, including the investor’s name or how much of Qoros it would control.

But sources close to the deal said the investor, which they said was not an automobile company, would take a 51% stake.

That would dilute by half the stakes of Kenon and its original Chinese partner, the Chinese carmaker Chery, to less than 25% each. But with Qoros listed on Kenon’s books at just $96 million as of the end of March, the deal would now value it at $1.85 billion after the money.

Kenon shares closed up 8.5% to $14 in New York on Friday. In Tel Aviv, the shares began climbing on Thursday and extended their gains on Sunday to end at 47.49 shekels ($13.48).

“The new investor’s investment is subject to a number of conditions which must be satisfied by a certain date, some of which are beyond the parties’ control and which the parties may be unable to satisfy,” Kenon said.

Kenon also said an agreement by the city of Yibin to invest in Qoros, announced on April 6, would not take effect.

A tiny automaker, Qoros has struggled to win market share in China even when the market was growing. More recently, however, Chinese automobile purchases have slowed and the purchase tax has been hiked to 7.5% from 5%.

In the first quarter of the year, Qoros sales plunged 21% from a year earlier to just $59 million, though it managed to slash its loss by 45%, to just $20 million. Since it was founded, the company has accumulated losses of $1.5 billion, far exceeding the losses Ofer suffered from his investment in the failed electronic-car company Better Place. Qoros has $1 billion in debt and just $9 million in cash on hand and is seeking to reschedule repayments.