Caixin
Jul 18, 2020 07:27 PM
BUSINESS & TECH

UBS, JPMorgan Fuel Biggest Chinese Battery-Maker’s $2.8 Billion Fundraiser

Contemporary Amperex Technology Co. Ltd.
Contemporary Amperex Technology Co. Ltd.

China’s largest electric-vehicle (EV) battery manufacturer has completed a multibillion-dollar financing, drawing in global investment banking giants including UBS AG and JPMorgan Chase & Co.

Shenzhen-listed Contemporary Amperex Technology Co. Ltd. (CATL) raised nearly 19.7 billion yuan ($2.8 billion) from nine investors through a private share placement last week, according to an exchange filing (link in Chinese) on Friday. The amount more than triples the money raised from its IPO two years ago.

The deal aims to expand production capacity and fund research and development (R&D), underscoring CATL’s ambition to better compete with foreign rivals in a lucrative but increasingly competitive market.

The company, which supplies batteries to automakers including BMW Group and Volkswagen AG, raised about 6.3 billion yuan, or nearly a third of the total, from four foreign investors after a bidding process.

That included 1.1 billion yuan from Swiss financial titan UBS and 1.5 billion yuan from two subsidiaries of American conglomerate JPMorgan Chase. The rest came from a subsidiary of major Japanese automaker Honda Motor Co. Ltd.

Another two foreign bidders, Goldman Sachs International and Merrill Lynch International, lost out due to lower bids.

Behind the largest successful bid was Chinese investment company Hillhouse Capital Management Ltd., who contributed 10 billion yuan, more than half of the total funding.

Together, the nine investors obtained a 5.3% stake in CATL with a six-month lockup period, giving the company a valuation of 375 billion yuan, according to Caixin’s calculations based on company filings (link in Chinese). The book value of their investments has increased, as CATL’s market cap stood at about 432 billion yuan on Friday amid a recovering Chinese stock market.

CATL will use most of the proceeds to expand its lithium-ion battery production capacity and technology R&D, in a bid to meet demand in a high-potential market, the company said (link in Chinese) in May.

Rapidly growing global sales of EVs in recent years have boosted demand for lithium-ion batteries. CATL has been one of the biggest beneficiaries, seizing the crown as the world’s top EV battery-maker by shipment for the first time in 2017, six years after it was founded, according to data (link in Korean) from consultancy SNE Research. At the time, it beat long-established rivals, including Japan’s Panasonic Corp. and South Korea’s LG Chem Ltd.

The lightning expansion relied heavily on two government policies: a de facto ban on foreign companies selling their batteries in China, and a decade-old subsidy program aimed at boosting the country’s new-energy vehicle (NEV) industry, multiple analysts said. But things have changed since last year.

 Read more 
In Depth: CATL Loses Electric-Car Battery Crown as Foreign Firms Muscle In

A turning point came in June 2019, when China abolished (link in Chinese) a government list of recommended vehicle battery suppliers, which launched in 2015 to promote industry development and only included homegrown companies. The move allowed foreign battery-makers to muscle into the country’s massive market.

Around the same time, China deepened cuts to longtime subsidies for NEV makers, reducing incentives for them and causing NEV sales to decline.

CATL’s global market share shrank later, ranking second after LG Chem in the first five months of this year, according to SNE Research (link in Korean).

Mo Yelin contributed to this report.

Contact reporter Lin Jinbing (jinbinglin@caixin.com) and editor Matthew Walsh (matthewwalsh@caixin.com)

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