Published: Fri, December 29, 2017
Markets | By Noel Gibbs

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

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

Volvo's vehicle and truck business were separated in 1999 when the former was sold to Ford.

Geely Holding bought Volvo Cars from Ford in 2010 and has been leveraging its ownership of the luxury carmaker to enforce its go-global strategy by marrying European styling and technology to Chinese production costs and manufacturing might.

Geely bought up legendary British auto maker Lotus earlier this year and a USA startup developing flying vehicle technology.

In its last full year, AB Volvo had sales of 301bn Swedish kronor (£27bn) and a pre-tax profit of 20.8 Skr. "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".

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Zhejiang Geely Holding Group [GEELY.UL], as the company is formally known, is the parent company of Geely Automobile Holdings Ltd (0175.HK).

Geely buying into the truck and industrial plant equipment could open up a massive new market in China to the company. Nomura and Barclays have separately committed to sell the shares to Geely, which will be acquired by the Chinese automotive group after necessary regulatory approvals.

Geely, which already owns the Volvo Car Group, will be the largest shareholder in terms of capital and the second largest in terms of voting rights, behind Swedish investment firm Industrivarden.

Geely would be able to provide Volvo with valuable access to the Chinese market and know-how in the field of electric and self-driving vehicles, Cevian Capital cofounder Christer Gardell said.

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The value of the transaction was not revealed.

The move comes after AB Volvo has made large strides in China in the recent times.

Volvo has also begun to reap the benefits from years of restructuring measures, including major cost-cutting programs, selling off non-core businesses, and management changes.

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