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Abu Dhabi, UAEFriday 14 December 2018

China's Geely takes $3.3bn stake in truck maker Volvo

Geely now becomes the largest investor in AB Volvo

The deal makes China's Geely the biggest individual shareholder in truckmaker AB Volvo and second ranked in terms of voting rights. Fabian Bimmer / Reuters.
The deal makes China's Geely the biggest individual shareholder in truckmaker AB Volvo and second ranked in terms of voting rights. Fabian Bimmer / Reuters.

China's Geely Holding , which already owns the Volvo Car Group, is buying an 8.2 per cent stake in Swedish truck maker AB Volvo from activist investor Cevian Capital for about US$3.3 billion.

Volvo Car was split from AB Volvo almost 20 years ago and Geely said it was not its current intention to try to reunite the two businesses.

"Given our experience with Volvo Car Group, we recognise and value the proud Scandinavian history and culture, leading market positions, breakthrough technologies and environmental capabilities of AB Volvo," Geely chairman Li Shufu said.

Geely's expertise in the Chinese market and skills in developing electric and autonomous vehicles should help the truck maker to expand, he said.

AB Volvo owns 45 per cent of Dongfeng Commercial Vehicles, one of China's largest truck makers, and also has a significant construction equipment business in China.

The value of the investment amounted to around 27.2bn Swedish crowns ($3.26bn), according to Reuters calculation, although Geely and Cevian did not disclose the exact value of the transaction.

The deal makes Geely the biggest individual shareholder in AB Volvo and second ranked in terms of voting rights behind Swedish investment firm Industrivarden.

Volvo's B shares traded 0.8 per cent higher for the day at 9.35am GMT, while Industrivarden's shares were flat.

Volvo shares have gained more than 50 per cent 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.

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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.

As well as Volvo cars which it acquired in 2010, Geely also owns the company that makes London's black cabs and sports carmaker Lotus.

In a sign of its ambitions, the Chinese company last month offered to take a stake of up to 5 per cent in Daimler via a discounted share placement but was rebuffed, according to sources with knowledge of the talks.

In the latest deal, Geely will acquire 88.5 million A shares and 78.8 million B shares to give it 15.6 per cent of Volvo voting rights. Industrivarden owns mostly A shares and controls 22.8 per cent of the votes.

Nomura International and Barclays Capital Securities have agreed to acquire Cevian Capital's shares, and will sell them to Zhejiang Geely when the necessary regulatory approvals have been obtained, the companies said.