(Yicai Global) May 31 -- Shares of Wuhan-based Dongfeng Automobile surged after the struggling carmaker confirmed an earlier Yicai Global news report about moving under its former controlling shareholder again as part of reorganization regarding a joint venture between Dongfeng Motor Group and Japan's Nissan Motor.

Dongfeng Auto's stock price [SHA: 600006] surged by the daily limit of 10 percent to CNY6.80 (USD1) while its market cap reached CNY13.6 billion (USD2 billion). The equity price is still more than 5 percent down over the past 12 months. Share trading had been suspended since May 25 due to the anticipated announcement.

Shares of the buyer, Dongfeng Motor [HK: 0489], rose 2.5 percent to HKD6.17 (80 US cents). The stock price is still 14 percent down in the past year.

Dongfeng Motor will spend CNY3.35 billion (USD502.8 million) to acquire 29.9 percent of Dongfeng Auto's shares from Dongfeng Motor Co., a JV established with Nissan, the target firm said in a statement yesterday. Moreover, Dongfeng Motor will buy another 25.1 percent stake with CNY2.81 billion (USD421.8 million) through a tender offer.

After the transfers, Dongfeng Motor has a controlling 55 percent stake in the light commercial vehicle manufacturer.

The transaction is an important step for the JV and it will focus more on the development of Nissan, Infiniti, and its original brand Venucia, according to the announcement. Meanwhile, Dongfeng Motor will develop commercial vehicles, increasing its investment in research and development at Dongfeng Auto, it added. 

Yicai Global reported about the plan on May 26. One of the people familiar with the matter said that Dongfeng Auto will be peeled off from the JV and become directly controlled and managed by Dongfeng Motor following the deal.

Another source close to the JV told Yicai Global that the reacquisition should be seen as part of the JV's business restructuring plan, aimed at improving the JV's operating efficiency.

Dongfeng Motor and Nissan established Dongfeng Motor Co. in 2003 as a 50:50 JV to manufacture and sell Nissan-branded models on China's mainland. That year, the JV bought a 60 percent stake in Dongfeng Auto.

The JV has been far more successful than Dongfeng Auto. Dongfeng Motor Co. Sold almost 1.4 million vehicles in 2021, whereas Dongfeng Auto's sales tallied 182,700 vehicles.

Editors: Dou Shicong, Emmi Laine, Xiao Yi