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Is Goldman’s Chinese convertible really a taxi?

September 21, 2009

BRITAIN/The number of London’s trademark black taxis booked and waiting outside the European headquarters of Goldman Sachs — meters running — was once used by some as a barometer of the health of London’s investment banking business.

When times were good, the queue was long and it was impossible for anyone else in the vicinity to hail a cab. But when the fees dried up, or markets turned, the cabbies who’d been at Goldman’s beck and call suddenly had to find new customers.

Last year, Goldman was reported to have stopped free taxis home for staff working in the office after 9pm, extending this to 10pm.

Now it looks as though taxis may be in vogue again at Goldman, at least indirectly.

Goldman Sachs Capital Partners — is that a taxi in the picture on the website? — now appears to be following in the tracks of the maker of many of London’s black cabs by cosying up to Geely Automotive — China’s 10th largest vehicle maker.

For Manganese Bronze — which has made more than 100,000 London taxis at its Coventry plant since 1948 — it was a case of turning to Geely for help and selling it a stake as well as entering a joint venture.

But in this case, it is Goldman that is providing the money — buying about $250 million of convertible bonds and warrants. Geely will use the proceeds to ratchet up its production.

Geely Automotive will no doubt be pleased with the celebrity endorsement. By persuading the U.S. investment bank to buy its convertibles, the Chinese carmaker is showing it is a force to be reckoned with.

Until recently, Geely has been seen as a somewhat optimistic “me-too” carmaker that was doing little more than window-shopping.

But it is one of the few privately-owned Chinese carmakers with a green light from Beijing to go shopping abroad. And its recent interest in buying Ford’s unwanted Volvo brand and its approach to Magna about an Opel production partnership shows its real ambitions.

So the Goldman Sachs private equity fund could end up owning Geely shares. Goldman may soon have taxis made by a UK firm in which it has an indirect stake through China queueing at its London doors.

That’s assuming its clampdown on taxi use is lifted by then of course.

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