Oleg Deripaska's GAZ Group said Wednesday that it would sell its British van maker, LDV, to Malaysian company Weststar after the British government stepped in to help finance the transfer.
GAZ agreed to sell the company to Weststar after the British government said late Tuesday that it would provide a short-term loan of ?5 million ($7.5 million) to the Malaysian vehicle importer to keep LDV operating while the terms of the deal are finalized.
"There are still terms to be determined in the deal," a GAZ spokeswoman said, declining to elaborate.
GAZ bought the van maker for ?22 million in 2006 from investment fund Sun Capital. The loss-making LDV, whose Birmingham-based manufacturing facility employs about 850 people, was planning to file for administration Wednesday after four months of stoppage.
LDV has been a partner of Weststar Group since 2007, and the franchise had exclusive rights to market and assemble LDV Maxus vans in 20 Asian countries.
"This investment opportunity was brought about by the economic turmoil in Russia and brings into Malaysian hands ownership of an international brand, first-rate products and access to European markets and technology at an affordable price," Weststar Group CEO Syed Azman said, Malaysian news agency Bernama reported.
Azman said GAZ offered LDV and its associated supplier company, Birmingham Pressings, to Weststar on Monday and that Weststar would have four weeks to complete the deal, according to the term of the bridge loan.
The government's decision to help the company was reported on LDV's corporate blog late Tuesday. "It would have been irresponsible of the government not to support it going forward," Business Minister Ian Pearson said in a statement. He said the loan was a one-off bridge loan that could not be extended.
A court hearing scheduled for Wednesday about LDV entering administration has been postponed a week, company management said in a follow-up blog post.
"Selling LDV will take the responsibility for a foreign asset away from GAZ," said Mikhail Pak, an auto analyst with Metropol. Supporting a British carmaker while simultaneously asking for money from the Russian government would likely eventually draw criticism from the authorities, Pak said.
Deripaska's Basic Element holding company appears to be also eyeing another European company, however. A source at GAZ, which BasEl controls through its Russian Machines unit, told Handelsblatt newspaper that the company might participate in a bid for Germany's Opel, currently owned by ailing U.S. automaker General Motors.
GAZ Group, also heavily in debt, will not take on any financial commitment, instead offering production lines and a servicing network in Russia, the source said.
Sberbank, GAZ's main creditor, could be singling out the carmaker as a possible consultant for the Opel purchase, despite GAZ's relatively small involvement in the car segment of the market, said Metropol's Pak.
GAZ's main plant in Nizhny Novgorod produces 5 percent of Russia's cars, about 56 percent of its cargo vehicles and nearly 48 percent of its buses, according to company data. The LDV purchase was supposed to lead to localization of LDV's Maxus vans in Russia and an eventual launch of a new generation of the ubiquitous GAZelle van based on the Maxus. The financial crisis interrupted the strategy, GAZ said statement said.
Given the latest market drop, LDV does not seem to have been a very helpful investment for Deripaska: while GAZ has sold 80,000 vans in the first six months of 2008, it sold only 4,500 Maxus vans and only 409 of them in Russia.
GAZ defended the purchase, however. "The partnership with LDV allowed GAZ to master the architecture and the introduction of new technologies into making commercial vehicles," deputy chairman Yelena Matveyeva said in the statement.
GAZ agreed to sell the company to Weststar after the British government said late Tuesday that it would provide a short-term loan of ?5 million ($7.5 million) to the Malaysian vehicle importer to keep LDV operating while the terms of the deal are finalized.
"There are still terms to be determined in the deal," a GAZ spokeswoman said, declining to elaborate.
GAZ bought the van maker for ?22 million in 2006 from investment fund Sun Capital. The loss-making LDV, whose Birmingham-based manufacturing facility employs about 850 people, was planning to file for administration Wednesday after four months of stoppage.
LDV has been a partner of Weststar Group since 2007, and the franchise had exclusive rights to market and assemble LDV Maxus vans in 20 Asian countries.
"This investment opportunity was brought about by the economic turmoil in Russia and brings into Malaysian hands ownership of an international brand, first-rate products and access to European markets and technology at an affordable price," Weststar Group CEO Syed Azman said, Malaysian news agency Bernama reported.
Azman said GAZ offered LDV and its associated supplier company, Birmingham Pressings, to Weststar on Monday and that Weststar would have four weeks to complete the deal, according to the term of the bridge loan.
The government's decision to help the company was reported on LDV's corporate blog late Tuesday. "It would have been irresponsible of the government not to support it going forward," Business Minister Ian Pearson said in a statement. He said the loan was a one-off bridge loan that could not be extended.
A court hearing scheduled for Wednesday about LDV entering administration has been postponed a week, company management said in a follow-up blog post.
"Selling LDV will take the responsibility for a foreign asset away from GAZ," said Mikhail Pak, an auto analyst with Metropol. Supporting a British carmaker while simultaneously asking for money from the Russian government would likely eventually draw criticism from the authorities, Pak said.
Deripaska's Basic Element holding company appears to be also eyeing another European company, however. A source at GAZ, which BasEl controls through its Russian Machines unit, told Handelsblatt newspaper that the company might participate in a bid for Germany's Opel, currently owned by ailing U.S. automaker General Motors.
GAZ Group, also heavily in debt, will not take on any financial commitment, instead offering production lines and a servicing network in Russia, the source said.
Sberbank, GAZ's main creditor, could be singling out the carmaker as a possible consultant for the Opel purchase, despite GAZ's relatively small involvement in the car segment of the market, said Metropol's Pak.
GAZ's main plant in Nizhny Novgorod produces 5 percent of Russia's cars, about 56 percent of its cargo vehicles and nearly 48 percent of its buses, according to company data. The LDV purchase was supposed to lead to localization of LDV's Maxus vans in Russia and an eventual launch of a new generation of the ubiquitous GAZelle van based on the Maxus. The financial crisis interrupted the strategy, GAZ said statement said.
Given the latest market drop, LDV does not seem to have been a very helpful investment for Deripaska: while GAZ has sold 80,000 vans in the first six months of 2008, it sold only 4,500 Maxus vans and only 409 of them in Russia.
GAZ defended the purchase, however. "The partnership with LDV allowed GAZ to master the architecture and the introduction of new technologies into making commercial vehicles," deputy chairman Yelena Matveyeva said in the statement.