China's Geely says it has no plan to buy Fiat Chrysler — as FCA stock leaps

HONG KONG — Chinese carmaker Geely Automobile denied media speculation on Wednesday that it planned to make a takeover bid for Fiat Chryslerk Automobiles (FCA), the world's seventh-largest automaker.

Geely was one of several Chinese carmakers cited in by Automotive News, which said representatives of "a well-known Chinese automaker" had made an offer this month for FCA, which has a market value of almost $20 billion.

"We don't have such a plan at the moment," Geely executive director Gui Shengyue told reporters at an earnings briefing, when asked if Geely was interested in Fiat.

He said a foreign acquisition would be complicated, but he did not elaborate. "But for other (Chinese) brands, it could be a fast track for their development," Gui added.

However, a source close to the matter said FCA and Geely Automobile's parent firm, Zhejiang Geely Holding Group, had held initial talks late last year, without disclosing their nature.

The source confirmed Geely was no longer interested in FCA, noting that the parent company had only three months ago announced its first push into Southeast Asia with the purchase of 49.9 percent of struggling Malaysian carmaker Proton, a deal that also included a stake in Lotus.

Geel's denial failed to dent FCA's stock. The price of its Milan-based shares has jumped more than 10 percent to a 19-year high since Automotive News first reported on Monday, citing unnamed sources, that FCA had rejected the Chinese offer as too low. FCA stock on the New York Stock Exchange rose sharply on Monday from $11.60 to $12.38 and on Wednesday was trading at $12.84.

FCA declined to comment on Wednesday.

FCA Chief Executive Sergio Marchionne has repeatedly called for mergers as a way of sharing the costs of making cleaner, more advanced cars, but he has repeatedly failed to find a partner and retreated from his search for in April, saying FCA would stick to its business plan. He has also spoken of spinning the successful Jeep and Ram divisions off from FCA.

Europe's largest carmaker, Volkswagen, and General Motors have both said they are not interested in talks with FCA.

On Wednesday, Geely Automobile reported a doubling of first-half profit, above expectations, as cars designed with Sweden's Volvo won over domestic consumers. Volvo is a unit of the Zhejiang Geely group, and has recently announced it will share its technology with Geely.

Like its peers, the Hangzhou-based group is looking at expanding overseas with a particular interest in entering the profitable North American market.The Italian government has made no comment on the merger speculation, but an Italian daily said on Tuesday that Rome was worried about potential job losses. Given FCA's legal domicile is in the Netherlands, and its headquarters is in the UK, the government could not do much to influence a takeover, it added. What the Trump administration might have to say about Chinese ownership of a Detroit automaker could be another matter.

Geely shares closed up 0.8 percent in Hong Kong, in line with the broader market. The company has a market value of around $22 billion.

FCA's Milan-listed shares were up 3 percent in afternoon trade at 10.96 euros, after touching 11.13 euros, their highest level since July 1998.

($1 = 0.8541 euros)

Reporting by Norihiko Shirouzu, writing by Giulia Segreti.

By Reuters