China’s Geely takes $3.8bn stake in Volvo trucks - Financial Times

26/12/2017

China’s Geely takes $3.8bn stake in Volvo trucks

Deal with activist Cevian Capital prompts talk of unifying car and lorry businesses

Volvo's truck and car businesses have been separate since 1999 © Bloomberg

Richard Milne, Nordic Correspondent

The Chinese owner of Volvo Cars is to become the biggest shareholder of truckmaker Volvo Group in a potentially historic realignment between the two Swedish automotive businesses.

Zhejiang Geely will pay about €3.25bn ($3.8bn) to Cevian Capital, Europe’s largest activist investor, for a stake in Volvo Group with 8.2 per cent of the capital and 15.6 per cent of the vote.

Talk of reuniting the two brands — split up when Volvo Group sold Volvo Cars to Ford in 1999 — is “premature”, according to people close to the transaction.

But Geely sees considerable potential for joint marketing between the two Volvos, shared technology projects on issues such as autonomous driving and electric vehicles, and the chance to help the truckmaker perform better in China where it has struggled, the people added.

Geely has surprised the automotive world with its resurrection of Volvo Cars since it acquired the Swedish carmaker in 2010.

Volvo Group itself has largely been turned around in the 11 years Cevian has been a shareholder with the Swedish activist making a profit of about €2bn on its stake. That would make the deal to sell the stake to Geely the most lucrative exit ever by an activist, according to Nomura, topping the €2.7bn Icahn Enterprises made last year when selling American Railcar Leasing.

Li Shufu, chairman of Geely Holding, said he was delighted by the deal. “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.”

He added that Geely would be supportive of Volvo’s management and board as it implements its strategy.

Volvo Group’s share price has doubled since June 2016 as a new chief executive, Martin Lundstedt, formerly head of truckmaker Scania, has revived its fortunes.

Volvo Cars’ chief executive, Hakan Samuelsson, sits on Volvo Group’s board and was a former truckmaking executive at Scania and MAN before helping spearhead Mr Li’s takeover of the upmarket car brand.

Nomura and Barclays Capital will formally acquire Volvo Group’s shares from Cevian before selling them to Geely after the necessary regulatory approvals have been received.

Christer Gardell, Cevian’s co-founder, said the activist was happy to have helped Volvo Group become a more competitive and valuable company.

“The agreement will not only give AB Volvo a new large and committed shareholder, but one with significant expertise in strategically important areas for future value creation, such as electrification, autonomous driving, connectivity and the Chinese market.”

Volvo Group built its first car in 1927 and soon after began making trucks. But in 1999 it followed the trend for separating cars and trucks by selling the former to Ford and subsequently buying Renault and Nissan’s heavy vehicles operations. Companies such as Daimler and Volkswagen, which still combine their truck and car businesses, have recently come under pressure from investors and analysts to consider a break up.