Reuters 4 min read
Volvo Cars has struck a deal to buy out parent company Zhejiang Geely Holding (GEELY.UL) from their joint ventures in China, in a move that could make a potential initial public offering (IPO) for the Swedish automaker more attractive to investors.
Hangzhou-based Geely, which also owns a 9.7% stake in Daimler (DAIGn.DE), said earlier this year it was considering options for Volvo, including an IPO and stock market listing. In February, Geely’s Hong Kong-listed unit Geely Automobile (0175.HK) and Volvo Cars scrapped plans to merge. read more
Handelsbanken Capital Markets analyst Hampus Engellau said taking full control of the Chinese joint ventures could help smooth the way for a Volvo Cars IPO.
“The clearer the ownership structure is, and the clearer the stakeholders in the company look, the easier it gets for investors to consider what it is they are investing in,” he said.
Such rules for electric carmakers have already been lifted, allowing Tesla Inc (TSLA.O) to make and sell vehicles via fully-owned operations in China. Volkswagen has gained control of an electric car unit in the eastern city of Hefei.
Volvo Cars’ deal, financial terms for which were not disclosed, will give it full ownership of its manufacturing plants in Chengdu and Daqing, its Chinese sales company and its research and development facility in Shanghai.
Volvo Cars said the transactions, which are subject to regulatory approval, would be carried out in two steps, starting in 2022 and seen formally completed in 2023.
“These two transactions will create a clearer ownership structure within both Volvo Cars and Geely Holding,” Geely’s CEO Daniel Li said in a statement, which did not refer to the possible IPO.
Volvo Cars CEO Hakan Samuelsson said in June the company was making progress towards a possible IPO later in 2021, and that while it would continue to share platforms and components with Geely, they would do so at “an arm’s length distance,” consistent with the way independent companies do business.