COLLAR TRADE
Two major US banks facilitated Geely’s Daimler mega deal
London/Hong Kong — Chinese billionaire Li Shufu’s Geely Group structured the purchase of its €7.3bn stake in Daimler through derivative transactions that allowed the buyer to build a large equity holding while limiting the risks, say sources. Geely entered into a so-called collar trade for the entire stake, making this the largest deal of its kind in a single stock globally, the people said, asking not to be named as the financing details had not been disclosed. Bank of America Corporate led the transaction with the help of Morgan Stanley, they said. Geely disclosed a 9.7% stake in Daimler last week after Bloomberg reported that the company was poised to become the largest investor in the German car maker. The collar trades — used in a hedging strategy that requires puts and call options of the same size and with the same expiration — allowed Geely to build up the stake quickly while potentially avoiding breaching German rules that require shareholders to disclose holdings exceeding...
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