Why did Tengzhong fail to purchase Hummer?

The capital for Tengzhong to purchase Hummer would have exceeded 100 million U.S. dollars. It was such a large overseas investment project that the NDRC would have reported it to the State Council after approval. Since Tengzhong had long ago planned and prepared to purchase Hummer, it should know this policy. So, why did Tengzhong not record it with the NDRC?

Tengzhong announced the acquisition of Hummer in June of last year, and then reported it to regulatory authorities. However, the company found it impossible to gain approval according to its original plan, so it reported to the NDRC via the Sichuan Provincial Development and Reform Committee, and only decided to buy the Hummer brand, not to buy shares and produce vehicles at home.

Under the terms of "final agreement" Tengzhong and GM signed October 9 of last year, Tengzhong will get the Hummer brand, trademark, ownership of the brand name, and also the patent rights involved in manufacturing Hummer vehicles. In addition, the buyer will carry on the existing distributorship agreements that GM signed with Hummer distributors.

It can be seen from the agreement that Tengzhong did not give up the intention of producing Hummer vehicles at home. What's more, the company planned to buy not only the Hummer brand, but also the distributing rights and channels, which is definitely beyond the scope of service trade. The company "racked its brains" to get around government regulations.

Application never submitted

Yao Jian, spokesperson of China's Ministry of Commerce (MOFCOM), made it clear that there is no accurate information about the content, structure, or mode of the transaction between Tengzhong and GM. It is also not clear what Tengzhong really wants from the transaction, with choices such as brand, exterior design, or stock ownership, and whether Tengzhong plans to carry out a direct transaction, or set up a new company in the U.S. or other countries. Moreover, further information is needed to learn about the funds required for the transaction, follow-up investment, the company's business circumstance, and the succeeding developmental pattern. Therefore, the MOFCOM does not think it is the right time to move into the stage of receiving the application.

Yao pointed out February 25 that all relevant authorities have not yet received a complete application program from Tengzhong for acquiring GM's Hummer brand, and it is the company itself that decided to cancel the acquisition.

According to relevant rules, domestic regulatory authorities will start the examination and approval work only after receiving complete acquisition programs, which should have the investment model, financing method, and other contents included.