China’s Geely will list part of its sports car brand Lotus in the US through a merger with a shell company that was founded by an LVMH-backed investment group in a deal that values the automaker at $5.4bn.
The merger announced on Tuesday will be between Lotus Technology, which has a plant in China and plans to make electric SUVs, and L Catterton Asia Acquisition Corp (LCAA), a special purpose acquisition vehicle, or Spac, founded by L Catterton.
L Catterton is a private equity group backed by LVMH and the family holding company for Bernard Arnault, the luxury group’s founder and currently the richest man in the world.
Geely has masterminded a series of deals as it seeks to unlock the financial potential of its global auto investments. These range from the initial public offering of Volvo Cars in 2021 to the Spac listings of its Polestar electric brand and Ecarx, a Geely-founded technology group that makes displays for car cockpits.
The Lotus deal includes $288mn of cash held by LCAA, a further $100mn that has been injected by a third party understood to be Geely. Lotus plans to hold an external fundraising through a private placement of shares later in the year.
The merger, which will give Lotus Technology’s current owners control of 89.7 per cent of the combined business, is expected to close in the second half of the year. The group will trade on the Nasdaq exchange in New York.
Spac deals were in vogue two years ago as a host of electric vehicle start-ups used them to raise money, often without having produced vehicles.
Many of the companies that listed have been hit with cost overruns or delays, from Lucid, which has struggled to ramp production, to Arrival, which this week axed half its remaining staff in an effort to remain solvent.
Geely took control of Lotus in 2017 when it bought a stake in Malaysia’s Proton, which owned the brand. The Chinese group injected about £3bn to revamp the UK brand, launching new models and revitalising its ageing production facility.
Last year Geely unveiled plans to expand Lotus globally, with a new Chinese factory and a series of “lifestyle” vehicles, or SUVs, to widen its portfolio beyond the brand’s traditional low-slung sports cars.
A new Lotus Technology factory in Wuhan, which was paid for by Geely, has the capacity to make 150,000 vehicles a year. The first electric model from the plant — the £90,000 Lotus Eletre — will be sold this year in China and Europe.
The brand plans to release an electric sports saloon later in the year, with a smaller SUV planned for 2024, all expected to be made in the Chinese facility.
Lotus Technology said the money raised from the Spac listing will go towards future products, technology development and expanding its global network.
Qingfeng Feng, chief executive of both Lotus Group and its subsidiary, Lotus Tech, said the tie-up will “help position Lotus Tech as a leading global luxury EV company”.
He added the deal brings “promising brand collaboration and strategic partnership potential worldwide”.