SHANGHAI, Oct 29 (Reuters) - Shares of Geely Automobile Holdings rose to a record high on Thursday, even as the broader market slipped, on hopes its parent's bid for Ford's Volvo unit would help boost its brand and technology.
Ford Motor named Zhejiang Geely Holding Group late on Wednesday as a preferred bidder for its loss-making Swedish unit Volvo Car Corp, bringing the long-running sale process closer to a conclusion.
Zhejiang Geely said its bid is supported by Chinese banks and it will now embark on further detailed discussions with Ford.
"We have made great effort and are well prepared. But whether the deal will go through depends entirely on the negotiation," Yuan Xiaolin, a spokesman for Zhejiang Geely told Reuters.
Both Ford and Zhejiang Geely did not disclose a possible sale price in what could lead to the biggest overseas acquisition by China's fast-growing auto sector.
But media reports suggested the price tag for Volvo could be closer to $2 billion than the $6.45 billion Ford paid for the Swedish car maker in 1999.
Geely shares rose as much as 4.5 percent to HK$3.0, the highest since the company was listed in 2004, before paring gains to 1.7 percent at HK$2.92, beating the benchmark Hang Seng Index, which was down 2.4 percent at the lunch break.
Other Chinese car stocks were also higher with SAIC Motor Corp, China's largest automaker, rising 3 percent in Shanghai on expectations of strong quarterly results to be announced on Friday.
China's auto market, the world's largest, posted strong sales this year as Beijing's stimulus policy boosted demand.
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Analysts say Geely, a home-grown car maker that used to make some of China's cheapest cars, has been trying to upgrade its models to tap the growing affluent China market. "If the acquisition is successful, that will help the listed arm to upgrade its technology and build its brand as Volvo is well-known in overseas markets," said Zhang Jiang, an analyst at Philip Securities Research.
She put a 12-month target for the stock at HK$3.2 and said if the deal closes, it could go even higher.
Geely shares have more than quadrupled this year on the Volvo hope and strong car sales in China, as well as an investment by Goldman Sachs in the company's convertible bonds. [ID:nHKG311594]
But some analysts doubted Geely's ability to manage a global car company.
"I think the market is still divided on the Geely deal," said Chen Qiaoning, an analyst with ABN AMRO TEDA Fund Management.
"If its parent indeed gets Volvo and the deal serves it well, the listed firm would benefit tremendously. But if they are unable to handle Volvo ... the listed company will suffer."
Zhejiang Geely said under the proposed transaction, Volvo's existing production and R&D facilities, union agreements and dealer networks would be maintained, while Geely would enhance Volvo's access to sales networks and sourcing opportunities in the Chinese market.
