Guangzhou Automobile Group (02238) plans to acquire a 50% stake in FAW Toyota; FAW Shares will become the second largest shareholder.

Guangzhou Automobile Group (02238) announces that on September 28, 2026, the Company and the Seller, FAW Shares, entered into an acquisition agreement, pursuant to which the Company has conditionally agreed to acquire, and the Seller has conditionally agreed to sell, a 50% equity interest held by the Seller in the Target Company, FAW Toyota. The Company intends to pay the consideration for the Proposed Acquisition by way of issuing consideration shares (i.e., issuing A Shares), at a price of RMB5.75 per consideration share. The final consideration will be determined by both parties through arm's length negotiations, primarily with reference to the valuation of the Target Company as set out in the appraisal report, and has been filed with or approved by the competent state-owned assets supervision and administration authority or state-owned enterprise, based on the principle of fairness and voluntariness through consensus, and will be confirmed by the Company and the Seller through the signing of a supplemental agreement. Upon completion of the Proposed Acquisition, the Target Company is expected to become a major jointly controlled entity of the Company, in which the Company will hold a 50% equity interest, and the financial information of the Target Company will not be consolidated into the consolidated financial statements of the Group. Toyota Motor Group will continue to hold the remaining 50% equity interest in the Target Company, and the Seller will no longer hold any equity interest in the Target Company. The Company intends to conduct the Proposed Issuance to no more than 35 specific target subscribers who are independent third parties to raise supporting funds. The total amount of supporting funds raised shall not exceed 100% of the consideration for the Proposed Acquisition, and the number of A Shares to be issued shall not exceed 30% of the total issued share capital of the Company before the Proposed Issuance. Upon completion of the Proposed Transaction, FAW Shares will become the second largest shareholder of the Company. However, it will not result in a change in the actual controller of the Company, nor will it constitute a restructuring and listing. China FAW is an important central enterprise in China's automotive industry, with deep accumulation in vehicle R&D and manufacturing, industrial chain layout, brand operations, and other aspects. The Company is a large domestic automotive industry group, continuously making arrangements in new energy and intelligent transformation, independent brand development, and industrial ecosystem construction. Both parties carry out strategic collaboration based on their respective resource endowments and advantageous foundations, further promoting resource sharing, complementary advantages, and deepening collaboration in technology, supply chain, and market areas. The Proposed Transaction is conducive to fully leveraging China FAW's accumulation and layout advantages in vehicles, industrial chain, and other multiple fields, as well as the Company's advantages in new energy and intelligent transformation, independent brand development, and industrial ecosystem collaboration, further unlocking synergy value. China FAW and the Company carry out strategic collaboration based on their respective industrial foundations and resource endowments. The Proposed Transaction is one of the important implementation projects for both parties to deepen strategic collaboration. Upon completion of the Proposed Transaction, FAW Shares will become the second largest shareholder of the Company and play an important strategic role. Relying on China FAW's accumulation and layout advantages in vehicles, industrial chain, and other multiple fields, while leveraging the Company's advantages in new energy and intelligent transformation, independent brand development, and industrial ecosystem collaboration, it will further promote resource sharing and complementary advantages between both parties, inject synergy value into the Company, and help enhance governance standards and profitability. The Proposed Transaction is also an important practice of complementary advantages between central enterprises and local state-owned enterprises, and central-local collaboration, which is conducive to promoting intensive allocation of industrial resources, deepening collaboration in technology, supply chain, and market areas, assisting the upgrading of the automotive industry in the Greater Bay Area, and jointly promoting high-quality industrial development. 1. Injecting profitable assets, improving the Company's profitability, and enhancing the Company's quality In recent years, affected by a combination of factors including intensifying industry price competition, declining joint venture business returns, asset impairment provisions, and increased investment in new energy transformation, the Company's operations have been under pressure, and for the 2025 fiscal year, a loss was recorded attributable to shareholders of the parent company. As a leading Japanese joint venture enterprise, FAW Toyota has a solid operating foundation. According to unaudited financial data, the net profits realized by FAW Toyota for the 2024 fiscal year and 2025 fiscal year were approximately RMB4.717 billion and RMB4.234 billion, respectively. Upon completion of the Proposed Transaction, the Company will hold a 50% equity interest in FAW Toyota, which can directly enhance the Company's investment income and improve net profit; relying on the scale advantages formed after the Proposed Transaction, the Company's industry discourse power and influence in supply chain bargaining, terminal channel layout, industrial policy alignment, and other aspects will be further enhanced. As FAW Toyota and GAC Toyota achieve collaborative operation and management, the efficiency of coordinated resource allocation will be further improved, and the profit expectations of the joint venture segment are expected to continue to improve, which will help consolidate the Company's operating foundation, enhance the Company's going concern capability and risk resistance, safeguard the Company's long-term stable development, and protect the lawful rights and interests of the Company and all shareholders. 2. Deepening state-owned assets and state-owned enterprise reform, optimizing the efficiency of state-owned capital allocation The Proposed Transaction is a major strategic cooperation between a Guangzhou municipal state-owned enterprise and a central enterprise in the automotive industry, aligning with the decisions and arrangements of the Party Central Committee and the State Council on deepening state-owned assets and state-owned enterprise reform, promoting the optimization of the layout of the state-owned economy and structural adjustment, and conforming to the relevant policy orientation of the national automotive industry. Through the Proposed Transaction, the allocation efficiency of state-owned capital in the automotive industry will be further optimized, which is conducive to enhancing the concentration of the domestic automotive industry and consolidating the foundation for high-quality development of the automotive industry. 3. Strong-strong alliance to reduce duplicate investment and comprehensively enhance the overall competitiveness of both parties The Proposed Transaction will promote the integration and collaboration of the two major joint venture systems, FAW Toyota and GAC Toyota, which is conducive to reducing duplicate investment within the same brand system and stabilizing the profit foundation of the joint venture business. By coordinating and integrating the advantageous resources of both parties in localized R&D, industrial chain and supply chain, production bases, and market expansion, the Proposed Transaction will share innovation costs, concentrate efforts on tackling and achieving breakthroughs in key core technologies, comprehensively enhance the comprehensive competitiveness of both parties, help enterprises seize development opportunities in the process of global automotive industry transformation and restructuring, and accelerate the building of an automotive group with global competitiveness. The proceeds raised from the Proposed Issuance are intended to be used for project construction of the Target Company, supplementing the working capital of the Company and the Target Company, repaying debts, and paying transaction taxes and fees and intermediary institution fees for the Proposed Transaction, among other purposes, thereby improving the overall financial condition and promoting the future development of the Group.