ZHONGSHENG Group Holdings Ltd., a distributor of Volkswagen AG’s Porsches and Audis and Daimler AG’s Mercedes-Benz cars in China, is raising as much as HK$5.6 billion (US$722 million) by issuing shares and selling convertible bonds to Jardine Strategic Holdings Ltd.

    Zhongsheng will issue 238.6 million shares at HK$10.80 each and sell convertible bonds worth HK$3.09 billion, the Beijing-based company said in a statement yesterday to the Hong Kong stock exchange.

    The money raised would help the company expand its dealership network to capitalize on increasing car sales. Sales in China’s auto market, the world’s largest, are forecast to expand to as many as 24.18 million vehicles this year, a 10 percent gain, according to the China Association of Automobile Manufacturers.

    “It’s a very good thing for Zhongsheng,” said Ole Hui, an analyst at Mizuho Securities Asia Ltd. “Jardine is not only a financial investor but also a strategic investor. This may be just the first step in a longer term cooperation.”

    The price Jardine is paying for the shares is 6.3 percent less than Friday’s closing level of HK$11.52. Jardine will have a 20 percent stake in the company after the share and convertible bond transactions are completed, Zhongsheng said.

    Jardine, a member of Jardine Matheson Group, retails Mercedes-Benz and Citroen vehicles in Singapore and Malaysia through its Singapore-listed Jardine Cycle & Carriage Ltd. arm. (SD-Agencies)