Stellantis: Acquiring 20% Stake in China’s Leapmotor for EUR 1.5 Billion; EUR 39 FVE Unchanged

No-moat-rated Stellantis announced that it has signed an agreement to acquire a 20% stake in Chinese battery electric vehicle maker Leapmotor for EUR 1.5 billion, subject to customary closing conditions and regulatory approvals. The company will fund the investment from cash on hand. As of June 30, the firm had cash and equivalents of EUR 49.0 billion on its balance sheet. Stellantis will have two seats on Leapmotor’s board and own a controlling 51% interest in a joint venture that will have sales and manufacturing exclusivity outside of China. Management believes regulatory approvals may take up to 10 months and JV shipments could begin in the second-half of 2024. However, management also expects to take delivery of Leapmotor shares before the end of 2023. Acquiring a EUR 1.5 billion stake in Leapmotor had a minimal impact on our EUR 39 fair value estimate. The 5-star-rated shares of Stellantis currently trade at a compelling 55% discount to our fair value.