By Clarence Leong
Zhongsheng Group Holdings Ltd.'s shares traded higher after the car dealer announced plans to acquire a Mercedes-Benz distributor in China in a cash-and-share deal worth US$1.3 billion.
Zhongsheng's Hong Kong-listed stock rose 8.9% to HK$70.35 by midday Friday, on track to close at an all-time high, and taking year-to-date gains to 27%.
Dalian-based Zhongsheng said late Thursday it had entered into a deal to acquire Zung Fu China, a major dealer of Mercedes-Benz in southern and western China, from a unit of conglomerate Jardine Matheson Holdings Ltd.
Zhongsheng plans to fund the cash payment portion of the deal via internal resources and bank financing. It will also grant shares to a unit of Jardine Matheson, the company's second-largest shareholder.
Jardine Matheson said the deal would help it consolidate its investment in the car dealership sector and "position its Chinese mainland business for growth in a dynamic environment, operating with the advantage of scale."
Bocom International on Friday raised its target price for Zhongsheng to HK$106.50 from HK$99.50, while keeping its buy rating. "Zung Fu China's high earnings quality suggests a decent new car sales margin and strong cost control, which we expect to further fuel earnings growth," the brokerage said.
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(END) Dow Jones Newswires