Shares of Dongfeng Group (00489.HK) are set to skyrocket 69.18% in the pre-market trading session on Monday, following a major announcement from its parent company, Dongfeng Motor. The surge comes after a 10-day trading suspension, during which the company formulated a significant capital market restructuring plan.

The core of this restructuring involves a two-pronged approach: the privatization of Dongfeng Group and the introduction listing of its subsidiary, Landtu Automobile Technology Co., Ltd. (Landtu Motors), on the Hong Kong Stock Exchange. This "one out, one in" strategy aims to optimize resource allocation and find new growth opportunities amidst the challenging automotive industry landscape.

According to the announcement, the privatization will be executed through a combined "equity distribution + absorption merger" model. Dongfeng Motor Group (Wuhan) Investment Co., Ltd., a wholly-owned domestic subsidiary of Dongfeng Motor, will acquire 100% control of Dongfeng Group. The privatization offer at a premium explains the dramatic surge in Dongfeng Group's stock price, as it presents an attractive exit opportunity for current shareholders.

This move comes as Dongfeng Group has been facing challenges due to the automotive industry's transformation and intensified market competition. With a low price-to-book ratio of only 0.25 times as of July 31, the company had essentially lost its H-share listing platform's financing function. The privatization is seen as a strategic decision to facilitate Dongfeng Motor's further development and comprehensive transformation without external interference.