Hangzhou-based Geely has snapped up a major stake in AB Volvo, adding one of the world’s leading truck manufacturers to its massive portfolio which already includes Volvo Cars.
Geely Holding has bought up a 8.2 percent stake (corresponding to 15.2 percent of voting power), of AB Volvo’s capital from Cevian Capital estimated at $3.8 billion, effectively becoming Volvo AB’s biggest individual shareholder and second-ranked in terms of voting rights behind Swedish investment firm Industrivärden, the Dagens Nyheter daily reported.
Geely chairman Li Shufu argued that AB Volvo “led the world in many aspects of commercial vehicle development, manufacturing and sales, arguing that any major shake-ups were unlikely due to the broad support the current management enjoys, based from previous experience with Volvo Car Group.
Geely has owned the Volvo Car Group since 2010, when it bought the Swedish car manufacturer from US automotive giant Ford.
Despite the striking name similarity, Volvo Car Group and AB Volvo are two different entities. The two split almost 20 years ago, and Geely insisted that it was not its current intention to try to reunite the two businesses.
Although neither Geely nor Cevian disclosed the exact sum of the transaction, the value of the investment was estimated at over SEK 32 billion ($3.8 billion).
“I thought Cevian would continue owning Volvo in 2018, given the speedy improvement of their performance in combination with how attractive market looks in both Europe and North America. My guess that Cevian were paid off for the move,” Handelsbanken analyst Hampus Engellau ventured.
Cevian, which has held shares in Volvo since 2006, was pleased with the deal.
“We are happy with the deal, otherwise we would not have done it. We have been in Volvo for eleven years and we have made Volvo from a medium-sized company to the best company in the industry,” Cevian founder Christer Gardell told Swedish Radio, describing his time with Volvo as “a long and demanding trip.”
Gardell expressed his assurance of the company’s bright future, which he claimed to be rooted in Geely’s strength in terms of expertise, electric vehicles and self-driving cars.
Dagens Nyheter economy expert Pia Gripenberg argued that the deal came as a “complete surprise,” citing a lack of coordination gains between trucks and passenger cars, which had caused the Swedish company to split into two parts. According to Gripenberg, Geely’s emphasis will be put on the Chinese market. However, the Volvo entities are unlikely to be reunited, as it would cost the Chinese another SEK 300 billion ($35 billion) to buy all the Volvo shares from the stock market.
Journalist and car market expert Jacques Wallner forecasted more prospective Chinese buyers for Swedish companies.
“It is unlikely that Li Shufu support such an investment from his own wallet. Chinese investors are probably behind him. So what I predict is that all owners of the Volvo Group today must that there are buyers from China lining up for their shares,” Jacques Wallner wrote in an opinion piece in Dagens Nyheter.
China already has the largest automotive sector in the world, and further development of the nation’s infrastructure amid growing economy is likely to fuel its demand for AB Volvo’s products, which include trucks, buses and construction equipment.