(Yicai) Sept. 29 -- GAC Group’s stock price rose by its daily trading limit after the Chinese state-owned carmaker revealed a plan to acquire a 50 percent stake in FAW Toyota Motor, a joint venture between China Faw, a subsidiary of FAW Group, and Japan's Toyota Motor.

GAC [SHA: 601238], whose shares resumed trading on the Shanghai Stock Exchange today, closed 10 percent higher at CNY5.60 (84 US cents).

GAC will acquire FAW’s stake in FAW Toyota through a share issuance, the Guangzhou-based company said yesterday. GAC announced on Sept. 14 that it had signed a letter of intent to acquire a partial stake in a vehicle manufacturing JV of FAW without naming the target company.

The deal’s value has yet to be determined, GAC said. It has proposed an initial price of CNY5.75 per share, with the final number of shares issued to be determined by the agreed value of the transaction, the firm added.

GAC intends to raise additional funds by issuing shares to no more than 35 qualified investors. The proceeds, capped at 100 percent of the transaction value, will be used to fund the target project, replenish working capital, repay debt and cover related taxes, fees, and intermediary expenses.

Through the deal, FAW Toyota will become a GAC joint venture and China FAW will become GAC's second-largest shareholder. Toyota and its Chinese subsidiaries own the other half of the JV.

Separately, China FAW and GAC Industry, the parent groups of FAW and GAC respectively, signed a cooperation framework agreement today. The companies said they will deepen collaboration in areas including capital and asset linkages, technology innovation, and cross-regional coordination of industrial resources.

GAC’s preliminary plan said the transaction is expected to boost its investment income and net profit while creating greater synergies between FAW Toyota and GAC Toyota in research and development, supply chain management, manufacturing, and marketing, thereby reducing duplicated investment.

Founded in 2000, FAW Toyota is headquartered in Tianjin and has registered capital of USD3.29 billion. Its operations span Tianjin, Changchun, and Chengdu, covering passenger vehicle R&D, manufacturing, and sales, as well as production of engines and other key components, supply chain management, marketing and after-sales services.

As of June 30, FAW Toyota had unaudited total assets of CNY43.1 billion (USD6.4 billion), liabilities of CNY13.4 billion, and shareholders' equity of CNY29.7 billion, according to GAC. During the first half, the JV had a net profit of around CNY1 billion (USD150 million) on revenue of nearly CNY41 billion.

Combined sales volume at FAW Toyota and GAC Toyota accounted for 17 percent of all sales of passenger cars produced by Chinese joint ventures, GAC said, citing figures from the China Association of Automobile Manufacturers.

Editor: Tom Litting