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SWEDEN: Chinese continue to buy top European firms like AB Volvo

posted onDecember 30, 2017

Zhejiang Geely Holding, China's leading privately owned automotive group, has bought an estimated $3.3 billion stakes in AB Volvo, a Swedish manufacturer of trucks, from Europe’s largest activist fund manager Cevian Capital.  As part of the deal, Geely will take control of 88.47m  A-shares and 78.77m B-shares. The exact value of the investment was not disclosed.

On completion and following necessary regulatory approvals, the Chinese automotive group, founded and controlled by billionaire Li Shufu, will become the largest individual holder of AB Volvo's share capital (8.2 percent) and the second-biggest holder of voting rights (15.6 percent) after Swedish investment firm Industrivärden.

Geely's portfolio already includes the Volvo Car Group, a separate entity from Volvo Trucks. In August 2010, Geely completed the $1.5bn acquisition of Volvo from Ford. The deal was the first takeover of a premium global car brand by a Chinese company. Geely's investment in both companies could fuel speculation of them being recombined, with potential synergies to be derived from sharing R&D, technology and in the supply chain. 

 Christer Gardell, founder of Cevian Capital
Christer Gardell, founder of Cevian Capital

"We are pleased with the deal otherwise we would not have gone through with it. We have been part of Volvo for 11 years and transformed it from a mediocre company to the best in the business," said Christer Gardell, founder of Cevian which sold its shares to Geely, in a comment to newswire TT. "We haven’t been out selling. We were approached and there have been ongoing talks. In the past few weeks those talks have intensified and become very concrete negotiations," he told TT.

Geely Holding Chairman Li Shufu
Geely Holding Chairman Li Shufu

Speaking on the acquisition, Geely Holding Chairman Li Shufu said:
"Given our experience with Volvo Car Group, we recognize and value the proud Scandinavian history and culture, leading market positions, breakthrough technologies and environmental capabilities of AB Volvo" 

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

This move by Geely continues the company's trend of acquisitions over the last few years. In 2013 it bought black cab business London Taxi Company while in June, it agreed to buy 49.9 per cent of Malaysian carmaker Proton and 51 per cent of iconic British sports car maker Lotus, which was owned by Proton. Geely also has stakes in  the London Electric Vehicle Company, and the Boston-based flying car company Terrafugia Inc. It was also launched a new brand, Lynk & Co, last year.  Geely

Zhejiang Geely Group

Zhejiang Geely Holding Group Co., Ltd is a Chinese multinational automotive manufacturing company headquartered in Hangzhou, Zhejiang. It sells passenger vehicles under the Geely Auto, Volvo, LYNK & CO, Proton, and Lotus brands and commercial vehicles under the London Electric Vehicle Company and Yuan Cheng New Energy Commercial Vehicle brands. Geely Automobile Holdings Ltd, a subsidiary of Geely, is listed on the Hong Kong Stock Exchange. On 13 February 2017 it is a constituent of the Hang Seng Index.

AB Volvo

AB Volvo is a Swedish multinational manufacturing company headquartered in Gothenburg. While its core activity is the production, distribution and sale of trucks, buses and construction equipment, Volvo also supplies marine and industrial drive systems and financial services. The company first listed on the Stockholm Stock Exchange in 1935 and it was also listed on other NASDAQ indices from 1985 to June 2007.