Yao Zhenhua, the fourth-richest person in China, is rescuing Israeli investor Idan Ofer from a failing investment in Chinese car maker Qoros by having his Baoneng Group buy a stake in the Shanghai-based company. The paper losses by Ofers Kenon Holdings will amount to $200 million — lower than expected.
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Kenon, which Ofer controls with a 58% stake, said Tuesday it had completed the sale that had been in the works for more than nine months. It sold Baoneng about half its Qoros stake after the deal won approval from Chinas Commerce Ministry.
The deal also provides for the sale of about half the stake that Wuhu Chery Automobile Investment Co., a subsidiary of Chery Automobile Co., has in the venture. Chery is owned by the Chinese government. The deal injects into Qoros about a billion dollars in cash and reduces Kenons stake to 24%.
Kenon has an option to sell its remaining stake in Qoros for 3.12 billion yuan ($480 million) and Baoneng, a real estate firm with other businesses, has an option to increase its stake to 67%. Qoros will be required to repay outstanding shareholder loans to Kenon and Chery amounting to 944 million yuan. In addition, Baoneng pledged that it or an affiliate would buy around 100,000 vehicles from Qoros each year over the next three years.
Kenon will receive $20 million immediately and repayment of outstanding shareholder loans within six months.
In Tel Aviv, Kenon Holdings shares surged 27.3% to 97.90 shekels ($28.46) on Tuesdays news. Analysts had pegged Kenons stake in Qoros as being worthless, so the news of the sale and the recovery of the funds sent the stock surging. Kenon now has a market value of 5.27 billion shekels ($1.53 million).
Ofer began investing in Qoros in 2007 through the Israel Corporation, which three years ago was split into two companies, one of which retained the Israel Corporation name. The other became Kenon Holdings, which was given assets including holdings in Zim Integrated Shipping Services and Qoros.
Since 2007 the Israel Corporation has invested $620 million in Qoros, while Kenon has invested another $245 million. Personal guarantees of $170 million were also provided. Ofer, who over the past two years provided $70 million to Qoros after Kenon resolved not to sink in any more money, will now get that sum back.