KUALA LUMPUR -- Chinese automaker Zhejiang Geely Holding Group agreed on Friday to purchase stakes of 49.9% in Proton Holdings of Malaysia and 51% in Lotus of the U.K., both owned by Malaysian automotive group DRB-Hicom, for a total of $235 million.
The move gives Geely -- China's seventh-largest car maker -- a production base in Malaysia and better access to Southeast Asia's auto market. The investment is also expected to give momentum to turnaround efforts at the loss-making Proton.
Under the deal, Geely will give Proton a cash injection of $40 million and supply it with the manufacturing platform for one of its best-selling cars, Boyue SUV, an undertaking worth $68 million. The company will also pump 100 million pounds ($127 million) into Lotus, and may produce the British marque in China.
For Geely, the $40 million cash payout is a pittance compared with the 1.3 billion ringgit ($304 million) DRB-Hicom paid to acquire a 42.74% stake in Proton from state investment fund Khazanah Nasional in January 2012.
"The acquisition is by no means a physical integration of assets but rather a collaboration to move forward the Proton and Lotus brands," Li Shufu, Geely's chairman, told a press conference.
Geely, which also owns Swedish auto brand Volvo Cars and London Taxi, will use Proton's manufacturing plant in Tanjung Malim to produce "price-competitive" cars, including a rebadged Boyue. Geely has promised DRB-Hicom that it will retain the Proton brand name.
The plant is one of the two manufacturing facilities operated by Proton. Under a government-led turnaround plan, Proton will sell its Shah Alam plant and consolidate operations in Tanjung Malim, which has an annual capacity of 350,000 cars. Proton uses only a third of its capacity, as its market share has declined over the years to 12.5% in 2016.
Geely will prioritize making cars for the domestic and regional markets, and will assemble Volvos if there is excess capacity.
Malaysia wants Proton to win back lost market share and get a stronger foothold in the region's 3.2-million-car market.
"DRB-Hicom has found a partner that has the ability, expertise and ambition to take Proton to new levels of success and a secure future," said Prime Minister Najib Razak in a speech.
But purchasing a controlling stake in British sports-car maker Lotus may be the biggest coup for Geely, which is known mainly for producing low-end cars in its home country.
"Producing the Lotus in China is something we will consider," said Li.
Under Proton's restructuring plan, the government will reimburse the national carmaker with 1.1 billion ringgit the company has spent on research and development. The government will also supply the carmaker with the remaining 250 million ringgit of a 1.5 billion ringgit soft loan extended last year. Most of funds from the reimbursement and loan will be used to repay bank loans and payments owed to vendors so that the company will can reboot debt-free under Geely's leadership.