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Great Wall of China Kicking the Tires on Fiat Chrysler

Great Wall, one of China’s largest automakers, is interested in talks with Fiat Chrysler regarding a purchase of the Jeep brand or perhaps the entire company. While Fiat Chrysler has said that it has not been contacted by Great Wall directly, the Chinese automaker has said it intends on beginning discussions.

Speaking to Automotive News, Great Wall’s CEO said: “We are deeply interested in the Jeep brand and have paid close attention to it for a long time. Our strategic goal is to become the world’s largest SUV maker. Acquiring Jeep, a global SUV brand would enable us to achieve our goal sooner and better.”

Fiat Chrysler has been looking for a merger partner for some time. Its CEO, Sergio Marchionne, has touted the benefits of scale in the automotive business and the persistent need for automakers to invest in new technologies – something larger companies can better afford to do. Fiat sought and was rebuffed by, General Motors as a merger partner. While the automaker, with strong Italian roots, has a competitive share of the market in Europe, South America, and North America, it has struggled to gain share in Asia.

Great Wall Motors was founded in 1984 and is China’s largest producer of sport utility vehicles and pick-up trucks. Last year it sold more than 1 million cars in China, which places it as the eighth largest Chinese automaker. Annual revenues are $14.8 billion, operating income is $1.8 billion, and Great Wall’s current market capitalization is $15.5 billion.

The Chinese auto market by brand and company.

While those figures represent astronomical growth for Great Wall and the Chinese market as a whole, they still are much smaller than the comparable figures for Fiat Chrysler, who had $117 billion in revenue and $5.1 billion in operating income last year. With shares higher by more than 6% today, Fiat Chrysler’s market cap stands at $20.4 billion. That could complicate any deal and may force Great Wall to focus on acquiring only Jeep – a far more digestible transaction, although it is possible that it is not so by much.

Adam Jonas of Morgan Stanley pegged Jeep’s stand-alone value at $33 billion – more than the current stock market value of all of Fiat Chrysler.

 

 

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