MBK invests $228m in China Auto Rental

The private equity firm will acquire around 442.6 million shares from chauffeured car service provider Ucar at a price of HK$4.00 apiece, according to a filing. Chinese carmaker BAIC Group agreed to purchase this position in July for HK$1.4 billion, but the transaction was terminated because it was not completed before the longstop date.

It follows a gradual appreciation in the stock price from a steady range around HK2.30 in October to as high as HK$3.29 on November 9. The stock fell 54% in early April to as low as HK$1.96 following a fraud at coffee shop operator Luckin. CAR founder Zhengyao Lu was an early backer of Luckin and served as its chairman. Luckin COO Jian Liu, who was dismissed over the fraud, previously held an executive role at CAR.

The stock was trading at HK$3.00 as of early afternoon November 11.

CAR positions itself as “the most recognized” automobility brand in China, with services spanning short-term rentals, long-term rentals, leasing and chauffeured car services through a collaboration with Ucar, which was also founded by Lu. There is a strong focus on digital services and innovation. Operations encompass a fleet of around 150,000 vehicles in more than 270 cities.

Revenue came to RMB5.6 billion ($843 million) in 2019, up from RMB5.3 billion in 2018, while adjusted EBITDA climbed from RMB3.25 billion to RMB3.46 billion. However, net profit fell 89.3% year-on-year to RMB31 million. For the first six months of 2020, revenue was RMB2.7 billion, down 26% year-on-year.

Warburg Pincus agreed to acquire a 17.1% interest in the company following its April share price decline. The deal comprised two tranches and only the first was completed. The private equity firm is a longstanding investor having committed $200 million for a significant minority stake as earlier as 2012. CAR, which went public in Hong Kong in 2014, is also backed by industry counterpart Hertz.

MBK’s previous exposure to the auto rentals space includes participation alongside Baring Private Equity Asia in a $937.5 million take-private of US-listed eHi Car Services, one of China’s largest operators. MBK was rumored to be in talks with BAIC about a potential take-private of CAR. However, CAR denied involvement in any such discussions. 

MBK concentrates on control investments in North Asia. It closed its fifth flagship fund at the hard cap of $6.5 billion earlier this year.

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• Topics
• Greater China
• Consumer
• PIPEs
• China
• MBK Partners
• automobiles
• Transportation