* To pay 640 mln eur for a 12 pct stake in JV partner
* First non-Chinese carmaker to own stake in Chinese peer
* Daimler gets two seats on BAIC Motor Board of Directors
* BAIC Motor to up stake in production JV with Mercedes
* Daimler to help BAIC in coming consolidation wave -source (Adds background, comments)
By Christiaan Hetzner
Daimler secured a stake in its partner BAIC Motor ahead of a planned stock offering by the Chinese carmaker, in an effort to catch up with larger German rivals in what could become the biggest market for luxury cars in the world.
Daimler will pay 640 million euros ($869 million) for a 12 percent stake in BAIC Motor and get two seats on the board in a deal that signals the German company's intention to reverse its flagging fortunes in China.
"We will be the first non-Chinese to take a stake in a Chinese OEM," finance chief Bodo Uebber said on Friday, using the industry acronym for a carmaker.
While Zhejiang Geely Holding bought Sweden's Volvo Cars, Germany's MAN is the only western truckmaker to take a stake in a Chinese peer, acquiring a blocking minority in Sinotruk in 2009.
As part of the new deal, Daimler agreed to BAIC Motor raising its interest in their production joint venture, Beijing Benz Automotive Company (BBAC), by 1 percent to 51 percent. This would allow BAIC to consolidate operations ahead of its IPO, Daimler said.
In what amounts to a swap deal, Daimler will receive a further 1 percent in the sales joint venture, Beijing Mercedes-Benz Sales Service Co., bringing its holding to 51 percent.
The deal with BAIC Motor is expected to close by the end of this year or in early 2014, Daimler said, suggesting that an IPO of the Chinese carmaker would not come any earlier.
Reuters first reported of Daimler's intention to purchase an equity stake last month.
Mainly because of difficulties in China, Daimler's Mercedes-Benz brand is now the smallest of the big three German luxury carmakers after BMW and Volkswagen's Audi, which together dominate the global market for high-end saloons and SUVs.
After admitting in July that its poor sales in China were more than just temporary, Daimler has moved aggressively to bolster its fortunes there and plans to increase annual volumes by half to 300,000 vehicles in 2015.
In December, Daimler brought in a new sales chief for China, appointed a new management board member