Volvo Cars announces IPO plan that could be valued at $ 25 billion

Volvo Cars, the Swedish automaker owned by China’s Zhejiang Geely Holding, said Monday it would conduct an IPO in Stockholm that could be valued at over $ 25 billion, according to people familiar with the matter.

Volvo plans to raise 25 billion kroner or $ 2.86 billion by issuing new shares. Geely could also sell an indefinite number of its shares. Volvo has not provided a target valuation of the entire company after an IPO, nor has it stated what percentage of the shares Geely would keep. Geely has previously indicated that it will likely remain a major shareholder even after an offer.

The proceeds from the IPO will be used to fund Volvo’s efforts to transform its fleet into an all-electric fleet. In addition, investments are being made in battery supply in Europe, the USA and China as well as in the in-house production of electric motors.

“This is about securing the future of the company,” said Hakan Samuelsson, CEO of Volvo Cars, in an interview. “Volvo is going to be an electric car company.” The Wall Street Journal initially reported that Volvo is finalizing its IPO plans and is expected to release them as early as Monday.

A listing would represent one of the most dramatic turns in the automotive industry. Ford engine Co.

, weakened by the global financial crisis, sold the Swedish company to Geely in 2010 for $ 1.8 billion.

Volvo has long benefited from a brand recognized for its safety, but at the time of sale, its range of products hadn’t impressed car buyers. Geely funded Volvo’s recovery over the next decade, opening up China as a market for the brand and providing funding to help the company revamp its model range.

Today, Volvo is profitable, with an electric model adoption roadmap ahead of some of its competitors. His brand is back in style in the US and elsewhere. It now competes with German premium brands, including BMW manufacturers Bayerische Motoren Werke AG, Volkswagen AGs

Audi and Mercedes-Benz brands from Daimler AG.

Volvo said Monday that sales rose 18% to 530,649 vehicles in the first nine months of the year and are expected to sell more than a million vehicles a year by the middle of the decade.

With a valuation of $ 25 billion, Volvo would be bigger than European automaker Renault TO,

that has a market value of just over $ 10 billion. That’s even though Volvo sells a fraction of the cars Renault sells each year. However, Volvo’s size would pale against the world’s largest automakers, including General Motors Co.

and Volkswagen, which underscores the Swedish company’s competitive challenge. Its value would also fall well short of the market capitalization of the leading electric vehicle, Tesla, of $ 767.5 billion Inc.

Still, listing would provide investors with yet another competitor to bet on in an auto industry race for electric vehicle adoption.

Volvo was the first conventional automaker to begin phasing out internal combustion engines and stop producing fossil-fuel-only cars in 2019. Since then, every new Volvo has been either an all-electric or a hybrid model.

Most major automakers have since announced that they will phase out conventional engines in new vehicles by around 2035 as well.

Volvo had already launched the idea of ​​a possible listing in 2018 and announced in May that it would consider an IPO on the Stockholm Stock Exchange. Such a listing could give the company a broader shareholder base and greater independence from its Chinese investors.

While it is not clear how large Geely’s stake is for sale, the company has previously indicated that it would likely remain a major shareholder after an offer.

An offer would come amid frenzied investor interest in electric vehicles and after an electric vehicle-focused Volvo subsidiary took its own step to capitalize on that enthusiasm.

Last week, Polestar, a Swedish electric vehicle maker owned by Volvo, Geely, and others, announced plans to merge with a special purpose vehicle and list it in New York to value the Swedish electric vehicle maker at about $ 20 billion.

Volvo said last month that after the completion of Polestar’s merger with Gores Guggenheim, it is expected to own nearly 50% of the combined company Inc.

The Polestar deal opened up a way for Volvo to pursue its own offer by assigning its stake a value of approximately $ 10 billion.

“It was important to separate the issue,” said Volvo CFO Bjorn Annwall, adding that investors are now seeing that Volvo, too, is going electric faster than some of its competitors after shutting down its internal combustion engine manufacturing business.

“Investors see this as a clear sign that we’re not just saying we’re going electric, we’re going to be doing it,” said Mr. Annwall.

Volvo and Geely pulled back from considering Volvo’s merger with Geely Auto Group earlier this year, raising expectations that the company would seek separate listing and greater independence from Geely Holding.

Ford bought Volvo in 1999 for about $ 6.5 billion. At the time, Volvo had 28,000 employees and produced around 400,000 vehicles a year.

When Ford put the company up for sale in 2009, Volvo was struggling. After Geely intervened, money flowed in.

Over a decade, Geely invested more than $ 11 billion to fund a lineup upgrade, an early switch to electric vehicles, and factories in China that helped Volvo capitalize on China’s growing appetite for Western cars.

In 2018, Volvo opened its first US plant. The brand was well known in the suburbs of America in the 1970s. But it had to rebuild its business in the world’s most lucrative auto market.

Volvo to manufacture the S60 sedan in Charleston, SC Next year the South Carolina plant plans to produce the XC90, a large, premium, electric sport-utility vehicle.

Volvo has invested more than $ 1 billion in the plant and employs 1,500 people there. The company has announced that its US plant will be the first to convert entirely to electric car production.

Write to Ben Dummett at ben.dummett@wsj.com and William Boston at william.boston@wsj.com

Copyright © 2021 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

.

Leave a Comment