Renault to Buy 25% of Russia’s AvtoVAZ Lada

Renault SA, France’s second-largest automaker, agreed to buy 25 percent of Russia’s OAO AvtoVAZ, fending off a bid from General Motors Corp.

Renault will purchase the stake in Russia’s No. 1 car company from state-owned arms exporter Rosoboronexport, Valery Kartavtsev, a spokesman for the defense firm, said today by telephone. He declined to give a price.

“AvtoVAZ would have given GM some extra capacity — and will give Renault some extra capacity — in one of the hottest markets in the world,” said Erich Merkle, an analyst at IRN Inc. in Grand Rapids, Michigan. “It’s a bit of a gain for Renault.”

Carmakers are jostling for a share of the Russian market, where foreign auto sales soared by almost two-thirds through September. Paris-based Renault already has a plant in Moscow, while larger French rival PSA Peugeot Citroen plans to choose a factory site this month.

Renault Chief Executive Officer Carlos Ghosn will travel to AvtoVAZ’s headquarters in Togliatti tomorrow, when more details will be announced, said Nathalie Bourotte, a spokeswoman for the French company. She declined to comment further.

GM said Dec. 4 it was pursuing a “significant” stake in AvtoVAZ, and spokeswoman Melisa Tezanos today had no immediate comment on Renault’s bid. The Detroit automaker already builds Chevrolet Niva sport-utility vehicles and Viva sedans in a joint venture with the Russian company. GM is nearing completion of a plant near St. Petersburg that will make 70,000 autos annually.

Russian Rise

GM’s sales grew 75 percent in Russia during the third quarter while declining 6 percent in North America. The increase helped GM regain its title as the world’s largest automaker from Japan’s Toyota Motor Corp. after losing it for the first half.

AvtoVAZ also signed an agreement with Magna International Inc. in July to develop a new sedan for the Russian market, and had identified the Canadian auto-parts maker as a potential investor, along with Italy’s Fiat SpA.

Renault’s stake would have a value of $1.36 billion, based on AvtoVAZ’s market value of $5.44 billion at the close today, according to data compiled by Bloomberg.

Foreign car sales in Russia surged 63 percent to 1.14 million vehicles in the first nine months, the Association of European Businesses said Oct. 9. GM’s Chevrolet led the way, with 131,653 sales.

Volkswagen AG, Europe’s largest auto company, opened its own Russian factory on Nov. 28. Toyota, Suzuki Motor Corp. and Volvo AB also plan to build Russian plants.

Source : Bloomberg

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