The two Chinese car companies that each own a chunk of the collapsed MG Rover are in talks that could lead to a £500 million takeover deal.

Nanjing Automobile Company (NAC), the firm which is restarting production of MG’s at Longbridge this summer, is in talks with bigger rival Shanghai Automotive, which has launched its own version of Rover’s 75 saloon, called the Roewe 750.

Reports from China suggest that the Beijing government is trying to broker a merger between the two.

The leadership, which has a major stake in both businesses, hopes they can jointly relaunch MG and sell cars into Europe and the rest of the world.

It wants them to combine their development, production and marketing efforts as both are marketing cars based on the old Rover 75 saloon.

Eleanor De La Haye, spokeswoman for Nanjing’s UK MG business, said: “The talks are more about the possibility of a working partnership. It is no secret that the Chinese government has ordered them to talk and that is what they are doing.

“The discussions at the moment focus on the mutual benefits that can be gained by them working together.

“Shanghai Auto is a big company – it is like the Ford of China – but NAC is the first Chinese car company to a globally recognised brand in MG. This could mean expansion for the development facility at Longbridge,” she added.

Both Chinese car companies ended up with parts of the MG Rover business after the business collapsed.

Nanjing Automobile bought the Longbridge business in 2005 for £53 million, getting the production equipment and the MG name.

But the Rover name, still owned by BMW which ran Longbridge in the 1990s, was later sold to Ford.

Shanghai Automotive, China’s biggest car company, had been in talks with MG Rover for a possible bail-out but backed away at the last minute, pushing the fatally weakened car company over the edge.

The failure of MG Rover left debts of £1.6 billion and cost 6,500 workers their jobs.

But Shanghai was left with blueprints for the Rover 75 and 25 cars. Earlier this year Hu Maoyuan, president of the firm said at the Shanghai Auto Show that his company wanted to co-operate with Nanjing Auto.

By Simon Penfold

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