Volvo Cars owner plots merger that puts listing back in play
Volvo Cars owner Li Shufu set out to combine the Swedish carmaker he bought in 2010 with his Hong Kong-listed automobile unit to create a company with the scale to compete in a rapidly consolidating global market.
Volvo, wholly owned by Li’s Geely Group, will start a process to merge with publicly traded Geely Automobile Holdings Ltd., according to a statement on Monday. The enlarged company would be listed in Stockholm as well as Hong Kong. The new structure could be in place by the end of the year, a Volvo spokesman said.
The deal would unify the bulk of billionaire Li’s growing stable of automotive brands and create a company worth some $30 billion, on par with Ford Motor Co. Since the Chinese businessman bought Volvo Cars, the company has doubled sales while growing rapidly in China. Li, who is also Daimler AG’s largest shareholder, has championed consolidation as a way for automakers to pool resources for initiatives like electrification and automated driving.
Global dealmaking has picked up in the past year as Volkswagen AG and Ford agreed to cooperate and Fiat Chrysler Automobiles NV is to merge with France’s PSA Group, owner of the Peugeot brand.
A joint listing with Geely Automobile would mark a creative way to list Volvo Cars, which delayed plans for an IPO in 2018, citing the impact of trade tensions on market appetite.
Geely Automotive commands a current market value of about $16 billion in Hong Kong, while Volvo targeted a range of $16 billion to $32 billion before it dropped its IPO plans, people familiar with the matter said at the time. Investors were only willing to pay between $12 billion and $18 billion, those people said.
Volvo Car’s euro bonds maturing 2025 advanced to 103.6, their highest intraday level since Jan. 27, as of 12:20pm in Stockholm. The senior unsecured notes are rated one step below investment grade.
Volvo was started in 1926 as a project within ball-bearing maker SKF AB, which wanted to show how useful its products could be in cars. The fledgling company was listed in Stockholm in 1935 before expanding to become a sprawling conglomerate that also made trucks and construction equipment, with stakes in pharmaceutical companies and breweries.
After a failed attempt at merging with France’s Renault SA, the Volvo group sold the passenger-car business to Ford Motor Co. in 1999 to focus on making trucks and buses. Geely took over the business from Ford in the wake of the financial crisis just over a decade later.
Moving Upmarket
Geely, which has been the top-selling Chinese car brand for three consecutive years, has sought to move upmarket through closer cooperation with its Swedish sister company. The new entity would also comprise Lynk & Co., which makes cars using Volvo’s CMA platform, and Polestar, a joint-venture that aspires to take on Tesla’s Model 3 with its first all-electric model, announced last year.
The new company’s combined annual shipments would surpass 2 million, based on data from 2019, rivaling shipments of BMW-branded cars.
Under Geely, Volvo has seen a resurgence of the brand led by sales of the popular SUV models that made up more than half of its sales last year. Deliveries in China have risen fivefold under Li’s ownership, and the company set up three assembly plants and an engine unit in the country.
Li Shufu also owns the London EV Company, famous for its taxis, holds a majority stake in Lotus Cars and bought a stake in the separate truck-making company, Volvo Group in 2018.
The car companies have already moved toward integration in response to industry challenges. In October, Volvo Cars announced that it will form a joint venture with Geely for the development of traditional combustion engines that could be operational at the end of the year.
—Niclas Rolander and Tian Ying (Bloomberg)
