Geely buys stake in Volvo truck business for $3.2 billion

Dec 29, 2017, 01:00
Geely buys stake in Volvo truck business for $3.2 billion

Zhejiang Geely Holding Group has reached agreement with Cevian Capital (Cevian), an activist fund manager, to acquire its entire 8.2% share capital holding and 15.6% voting rights in AB Volvo, the Swedish manufacturer of trucks, buses, construction equipment, diesel engines, and marine and industrial engines.

The transaction would make Geely the biggest single shareholder in Volvo and the second-biggest holder of voting rights.

"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 in a statement on Wednesday.

In May, Geely agreed to buy a 51% stake in British sports-car brand Lotus and a 49.9% stake in struggling Malaysian auto maker Proton Holding, which gave it a foothold in Southeast Asia. Financial terms weren't disclosed, though analysts estimated the value of the deal at around 27 billion kronor ($3.3 billion).

How the deal impacts Volvo's relationship with Chinese truck maker Dongfeng, in which Volvo has owned a 45% stake since 2015, is unclear.

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

However, Volvo shares have gained nearly 50 percent this year as it and rivals in the truck industry such as Germany's Daimler (DAIGn.DE) and Volkswagen (VOWG_p.DE) hit a sweet spot thanks to robust demand in major markets.

This move by Geely continues the company's trend of acquisitions over the last few years.

So, will this mean a reuniting of the truck and construction vehicle arm of Volvo with Volvo Automobiles? Geely also owns the company that makes London's black cabs and bought British sports carmaker Lotus back in August. Industrivarden owns mostly A shares and controls 22.8 percent of the votes.

Industrivarden declined to comment when contacted by Reuters.

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