STOCKHOLM (BLOOMBERG) - Zhejiang Geely Holding Group Co is set to become the largest shareholder in Volvo AB after Cevian Capital AB decided to sell its stake in the Swedish truckmaker that the activist investor was seeking to break up.
The Chinese auto manufacturer plans to buy Cevian's 88.5 million Class A Volvo shares and 78.8 million Class B shares, corresponding to 8.2 per cent of the capital and 15.6 per cent of the votes, the companies said Wednesday (Dec 27). The deal is valued at about 3.25 billion euros (S$5.21 billion), people familiar with the matter said, verifying a figure reported earlier by Swedish newspaper Dagens Nyheter.
With the purchase, Geely, which owns the Volvo Car brand that Volvo AB sold almost two decades ago, is making its first foray into the heavy truck and bus segment, and it's also extending its effort to bulk up outside of China.
Geely in September bought a 49.9 per cent stake in Malaysia's Proton Holdings as well as 51 per cent of British sports-car maker Lotus Cars.
Geely, owned by Chinese billionaire and founder Li Shufu, bought the Volvo Car nameplate from Ford Motor Co in 2010 and is moving the brand upscale after reviving it.
The Chinese company said it plans to use the new tie-up with Volvo AB to enhance the truckmaker's electrification, autonomous driving and connectivity, technologies that it's been developing at the car operation.
In addition to its namesake heavy-vehicle brand, Volvo AB's marques include Mack, Renault Trucks and UD.
Cevian has long wanted Volvo AB, Europe's second-biggest maker of commercial vehicles, to take steps such as divesting its construction-equipment business to streamline. While no large restructuring along those lines emerged, Volvo AB has disposed of its information-technology business and cut jobs, and in September it set a margin goal for the first time since 2012.
Cevian will use proceeds from the stake sale for new investments or to raise current holdings, co-founder Christer Gardell said in a phone interview, declining to give a figure or disclose possible purchases.
The "timing is good" for the disposal after the investment firm helped transform the truckmaker "from a mediocre company into a very good company," he said.
"We have full confidence in the board and the management" and, regarding any breakup strategy, "we trust that they'll handle that matter in a good way", he said.
Cevian has one seat on the Volvo AB board, held by Eckhard Cordes, a partner at the investment firm and a former executive at Daimler AG. Hakan Samuelsson, the chief executive officer of Geely's Volvo Car Group, also sits on the truckmaker's board.
Swedish Enterprise Minister Mikael Damberg said he welcomed the new investor in Volvo AB, which is the country's largest company by revenue.
"The new owner Geely has proven to be a serious investor linked to the development of Volvo Cars, made major investments in Sweden, grown the number of employees and has so far been a success story," he said to news agency TT.
Since Cevian announced in September 2006 that it held 5 per cent voting control in Volvo AB, the manufacturer's Class B stock returned 181 per cent, including dividends.
Sweden's benchmark OMX Stockholm 30 Index returned 135 per cent in the period.
Gardell estimated that Cevian's holding over 11 years and the stock's sale have earned the investment company 20 billion kronor (S$3.2 billion).