CAR Inc., previously known as China Auto Rental Inc., has kicked off its initial public offering in Hong Kong. The Beijing-based firm, which is backed by private-equity firm Warburg Pincus and US car rental giant Hertz, aims to raise up to HK$3.62 billion (US$468 million) from the share sale, according to reports.
The Chinese company changed its name in July as it didn’t want to be known as a mere car rental firm. CAR now also aims to be a major player in various services including new and used car sales, and maintenance & repair of vehicles, as well as ‘internet of vehicles’.
The road to the IPO has certainly been a bumpy one.
The car rental group sought to go public in the United States two years ago but withdrew the application later, saying the accounting scandals at some US-listed Chinese firms have dampened investors’ appetite.
However, market sentiment was just one of the reasons. The truth is that the group’s financial and operating performance failed to impress investors.
Then came a white knight, in the form of Chinese technology giant Lenovo.
Grand Union Investment Fund, the investment arm of Lenovo, acquired nearly 37 percent stake, becoming the largest shareholder of CAR.
At that time, CAR was seriously in debt. Lenovo not only provided direct loan to the group, it also lined up with Bank of China and China Merchants Bank to supply 5 billion yuan credit line to CAR, which greatly helped the rental services firm to develop its business.
Lenovo also helped bring in PE fund Warburg Pincus and global car rental titan Hertz as CAR’s cornerstone investors.
Last April, Hertz agreed to buy about 20 percent of CAR. The US firm may boost its holdings in the Chinese company when the IPO occurs. Mark Frissora, chairman and CEO of Hertz, has high hopes for China as its car rental market has already surpassed that of France, currently the biggest market in Europe.
Other than assisting CAR on funding issues, Lenovo also helped the group expand its business by rebranding it into a car services company which is a lot more than a car rental firm.
The number of CAR’s subsidiaries has increased from 12 to 52 within two years; Shenzhou Used Car Dealer and Beijing Kaipu Parking Management are two of its major subsidiaries. Meanwhile its total assets have surged from 3.8 billion yuan to 6.6 billion yuan during the period, according to its prospectus.
The IPO is set to be priced on Sept. 11, with shares scheduled to make their debut on the Hong Kong bourse on Sept. 19.
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