Geely Automobile said it was selling bonds and warrants worth a total of 2.59 billion Hong Kong dollars (334 million US) to GS Capital Partners VI Fund, a private equity fund controlled by the US investment bank.

The Goldman Sachs fund would end up with a 15.1 percent stake in Hong Kong-listed Geely if it fully converts the bonds and warrants into stock, the privately owned Chinese carmaker said in a statement.

Under Chinese regulation, a foreign partner's stake in an auto joint venture must not exceed 50 percent.

Geely said it plans to use the money to "fund the capital expenditures of the group, potential acquisitions by the group and for general corporate purposes of the group".

Its shares opened 26 percent higher Wednesday at 2.25 Hong Kong dollars, after being suspended since September 16 pending the announcement.

Parent company Geely Holding Group said two weeks ago that it may bid for Ford's loss-making Volvo unit in partnership with an unspecified state-owned investment company.

Chinese carmakers are on the hunt for foreign deals as competition intensifies on their fast-growing home turf.

State-run Beijing Automotive Industry Holding Co. Ltd (BAIC) is teaming up with Swedish sports car maker Koenigsegg to buy Saab from troubled General Motors, Koenigsegg said on September 9.

Little-known Sichuan Tengzhong Heavy Industrial Machinery signed a tentative agreement with GM in June to buy the Hummer nameplate.

BAIC was involved in talks to buy GM's Opel unit, but the US giant said this month that it was selling the German-based division to Canadian auto parts maker Magna and Russia's Sberbank.

"It's good news for Geely that a big investment bank is upbeat on the company's outlook," John Zeng, a Shanghai-based auto analyst with IHS Global Insight, told AFP.

"Geely has been accelerating the release of new products in recent years, particularly this year. Its plants in Chengdu and Shandong are starting operations. It's under big pressure to get more working capital and raise funds."

However, Zeng said the deal might not be directly related to the possible Volvo bid, as "the proceeds would not be adequate to obtain Volvo, which was valued at two to three billion dollars."

Geely's sale to Goldman included 1.9 billion Hong Kong dollars worth of bonds and 299.5 million warrants. It will raise further funds once Goldman pays to convert those securities into shares.

The bonds can be converted into shares at 1.90 dollars, representing a premium of about 6.1 percent to Geely's last stock closing price of 1.79, the company said.

There is a 28.5 percent premium to the closing price on the warrants, which can be converted for 2.30 dollars each.

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