April 24, 2018

Geely acquires strategic stake in AB Volvo

29 December 2017, 01:03 | Lorenzo Hawkins

China's Geely turns to Volvo trucks in latest Swedish venture

China's Geely adds to Swedish assets by taking major stake in truck-maker Volvo

Geely Holding Group (吉利控股) on Wednesday said the acquisition of shares from Cevian Capital AB, a fund manager, would give it 8.2 percent of Volvo's share capital and 15.6 percent of the voting rights.

Geely Holding acquired the Volvo Car Group from Ford Motor Company in 2010 but says it has no plans to merge the two Volvo businesses, but sees potential for joint marketing. The deal is valued at about €3.25 billion ($3.9 billion), people familiar with the matter said separately, verifying a figure reported earlier by Swedish newspaper Dagens Nyheter.

How the deal impacts Volvo's relationship with Chinese truck maker Dongfeng, in which Volvo has owned a 45% stake since 2015, is unclear. Geely and Cevian declined to disclose the exact value of the transaction. Volvo Trucks is one of the world's leading manufacturers of heavy trucks but it needs the assistance of a company better entrenched in the rapidly expanding Chinese market.

Li said Geely would support Volvo management's current strategy.

Volvo shares have gained more than 50 percent this year as it and rivals in the truck industry such as Germany's Daimler and Volkswagen hit a sweet spot thanks to robust demand in major markets.

Geely also launched a new brand, Lynk & Co, last year.

Cevian, which has held shares in Volvo since 2006, this year called for a break-up, suggesting the smaller Volvo Construction Equipment and engine and technology firm Volvo Penta should be separated from the main truck making business. Geely also owns the company that makes London's black cabs and bought British sports carmaker Lotus back in August. It is believed Geely paid about £2.5bn for the stake. Industrivarden owns mostly A shares and controls 22.8 percent of the votes.

Under the agreement, Cevian has sold all of its 88.47 million A shares and 78.77 million B shares in AB Volvo to Nomura International and Barclays Capital Securities.

Industrivarden declined to comment when contacted by Reuters.

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