Chinese tycoon set to rescue Kenon from Qoros

Idan Ofer  photo: Reuters

Yao Zhenhua's Baoneng Group is expected to inject $1 billion into the auto venture.

Kenon Holdings Ltd (TASE:KEN: NYSE: KEN-WI), controlled by Idan Ofer, is making progress in the sale of all of its holdings. Kenon today announced that a public auction in China for the sale of a controlling interest in Qoros, Kenon's faltering Chinese auto venture, had ended with no additional bids. Baoneng Group, the Chinese group that agreed six months ago to acquire control of Qoros, is therefore expected to complete the deal.

Kenon owns 50% of Qoros, and Chinese company Wuhu Chery Automobile Investment owns the other 50%. Since Chery is a government company, the sale of its stake requires a public auction, but no other offers were received for Qoros, leaving Baoneng as the sole bidder. Baoneng is controlled by billionaire Yao Zhenhua, who was recently named as the fourth wealthiest person in China. Headquartered in Shenzhen, Baoneng was founded in 1992, and now owns 40 companies in real estate, trade, logistics, finance, education and training, insurance, and health.

No cash for Kenon in the deal

Under the deal, Baoneng is due to inject 6.5 billion yuan ($977 million) into Qoros for a controlling share in the company. All of this money will go to Qoros. Kenon and Chery will receive no money in the deal, but will probably not have to inject additional money into Qoros.

The agreement for the sale of a controlling interest in Qoros to Baoneng is a lifesaver for Qoros, which has been unable to make headway, despite the huge investments in it and the heavy losses suffered by its shareholders. Qoros, founded by Kenon and Chery, develops and markets cars with regular, hybrid, and electric engines in the Chinese market and worldwide. Its losses to date total nearly $1.6 billion.

Qoros is Ofer's second money-losing auto venture, after the Better Place electric car venture collapsed several years ago. Ofer invested in Better Place through Israel Corporation (TASE: ILCO), together with entrepreneur Shai Agassi. Over NIS 3 billion invested in Better Place was lost.

On the way to a large dividend

Kenon's share price responded to today's report with a 3% rise, and has climbed 70% over the past year, pushing its market cap up to NIS 4 billion. Since the beginning of 2015, when Kenon was first listed on the TASE, after it was split off from Israel Corporation, the share price has gained 16%. It plunged by over 50% by April 2016, but  then recovering impressively. A large part of this recovery is attributable to Kenon's successful investment in power stations company ICP.

An agreement was recently signed for the sale of ICP's power stations in Latin America to the Squared Capital I fund for $1.2 billion. This was Kenon's most successful investment, and the company plans to distribute the cash it receives from the deal as a dividend to its shareholders, instead of investing the money in other assets, as part of the process of selling all of the Kenon's activities.

Following the completion of the ICP and Qoros deals, Kenon will be left with a 32% holding in shipping line Zim Integrated Shipping Services Ltd., which recently posted a major improvement in its business results, and a 76% holding in power stations company OPC Energy Ltd. (TASE:OPCE), whose market cap is NIS 1.7 billion.

Published by Globes [online], Israel Business News - - on December 21, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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Idan Ofer  photo: Reuters
Idan Ofer photo: Reuters
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