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Geely’s acquisition of Daimler’s 9.69% stake was again ruined and fined 10 million euros?
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Recently, foreign media reported that the German Federal Financial Supervisory Authority believed that Geely violated the relevant regulations during the acquisition of Daimler shares, and currently faces a fine of up to 10 million euros or a huge fine of 5% of annual turnover. At the same time, the German government hopes to use this incident to amend relevant laws and regulations to strengthen supervision of commercial acquisitions.

    In response, Geely responded through media reports on May 13 that it had fulfilled the disclosure requirements of German regulators accurately, but due to the recent introduction of new policy provisions by German regulators, Geely needs to carry out some relevant information on the acquisition. Supplementary disclosure.

    In a letter from the Frankfurt Ministry of Finance quoted by the German Ministry of Finance, Geely Chairman Li Shufu's equity investment in Daimler should be "partially" disclosed on February 22 instead of February 23. The newspaper saw a letter saying that the German Federal Financial Supervisory Authority (BaFin) survey found that documents submitted for the 3% and 5% thresholds should be completed on February 22. After the conclusion of the investigation, the possible fines will be determined by BaFin.

    In addition, Reuters also reported that the German Federal Financial Supervisory Authority said in a statement: "Li Shufu should report and submit relevant acquisition information on February 22 instead of February 23. We are investigating whether a fine is needed."

    According to the German Securities Exchange Act, natural persons will face a fine of up to 2 million euros in violation of the disclosure rules, and companies may face a fine of up to 10 million euros or 5% of annual turnover. The company that holds the 3% or more voting shares of the German listed company for the first time needs to inform the listed company and the Federal Financial Supervisory Authority. The threshold for disclosure increases by 3%, 5%, 10%, 15%, etc. However, Li Shufu immediately acquired nearly 10% of Daimler's shares and did not disclose the acquisition information in a timely manner.

    According to foreign media reports, the investment banks, including Xingye and Morgan Stanley, took the lead in purchasing and then handed over to Geely Holdings, which Li Shufu held, to become a practical operation plan。 Since November, the investment bank has started to acquire Daimler shares by directly buying and borrowing stocks in the secondary market。 In the transaction structure, direct acquisitions in the secondary market accounted for 4。9%, while the remaining 4。79% were partially borrowed from hedge funds。 Since the daily trading volume is not large enough to affect Daimler's stock price and does not reach the amount that must be disclosed, the whole process feels "quiet" to the outside world。

     According to a letter from the German Ministry of Finance obtained by Reuters, as part of the transaction, the German Federal Financial Supervisory Authority has asked Morgan Stanley to correct the date of the disclosure. The German Ministry of Finance manages the German Federal Financial Supervisory Authority and refuses to explain the details of the letter. However, Morgan Stanley has revised the date of document disclosure in accordance with the requirements of the German Federal Financial Supervisory Authority.

     In response, on May 13, Geely responded that Geely notified the market on the first time, February 23, 2018, about its 9.69% stake in Daimler, and the content of the notice was accurate. Geely believes that on February 22, although the transaction was basically finalized among the shareholders, since the communication with the investment bank had not produced legal effect, there was no disclosure obligation at the time.

     However, some media also noticed that, in fact, as early as February 27, the German Federal Financial Supervisory Authority said that it would investigate Chinese automaker Geely to acquire 9。69% of Daimler AG through its overseas corporate entity for approximately US$9 billion。 Whether the disclosure requirements are complied with。 "As in other similar cases, we naturally consider whether such an acquisition will comply with the disclosure requirements in a timely manner," the German Federal Financial Supervisory Authority said in a statement at the time。


The following is Geely's response:

     In the first time, on February 23, 2018, Geely notified the market about its holding of 9.69% of Daimler's shares, and the contents of the notice were accurate.

    Geely informed the capital market that the number of voting rights it holds is also always accurate. BaFin (German Federal Financial Supervisory Authority) has never raised any objection to Geely’s notice on the 23rd. However, BaFin asked Geely to make a supplementary disclosure on February 22, 2018. This requirement was based on BaFin's latest interpretation of the policy terms, which was first announced on May 9, 2018.

BaFin believes that Geely is required to make additional disclosures because Geely informed the relevant investment bank on the 22nd (that is, the investment bank that finally sold the shares to Geely on the 23rd), and Geely's shareholders have approved the potential transaction in principle. However, this internal communication with the investment bank does not impose any legally binding obligations on either party. Legal obligations arise only after the parties have signed a formal share purchase agreement on the 23rd. From the night of the 22nd to the 23rd, the two sides are still negotiating the contents of the purchase agreement. In short, the amount of voting rights that Geely disclosed to the capital market has been accurate. The supplementary disclosure required by BaFin will not have any impact on this fact.


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