China's Geely Holding Agrees To Buy Stake In Swedish Truck Maker Volvo

Vollvo truck

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China's Geely Holding [GEELY.UL], owner of the Volvo vehicle brand, is buying an 8.2 percent stake in Swedish truckmaker AB Volvo (VOLVb.ST) from activist investor Cevian Capital, worth around $3.3 billion at current market prices.

Geely buying into the truck and industrial plant equipment could open up a massive new market in China to the company.

But in 1999 that all changed when Ford bought Volvo Cars from AB Volvo, makers of Volvo Trucks.

Geely's voting power in Volvo will be second only to Swedish investment firm Industrivarden, which holds 22.82% of AB Volvo's voting power, according to AB Volvo's third-quarter financial report. It purchased The London Electric Cab Co. along with majority stakes in PROTON Holdings and Lotus Cars.

The value of the investment amounted to around 27.2 billion Swedish crowns ($3.26 billion), a Reuters calculation showed. Geely and Cevian declined to disclose the exact value of the transaction. AB Volvo is now leading the industry into a new era.

Lynk & Co, a joint venture between Volvo Cars and its parent group Geely, started selling its first model last month, joining the competition in the mainland's mainstream vehicle segment which is dominated by foreign brands including Volkswagen, General Motors, Ford and Toyota.

Li said Geely would support Volvo management's current strategy.

Zhejiang Geely Holding Group [GEELY.UL], as the company is formally known, is the parent company of Geely Automobile Holdings Ltd (0175.HK). The Volvo Group itself has largely been turned around in the 11 years, for which Cevian has been a shareholder with the Swedish activist making a profit of about €2 billion (Rs 15,288 crore) on its stake.

Under the terms of the agreement, Cevian will sell all of its 88.47 million A-shares and 78.77 million B-shares in Volvo to Nomura International and Barclays Bank, Geely and Cevian said in a joint statement.

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