Volvo Cars owner Li Shufu has 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, according to a statement yesterday. 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 $30bn (€27.4bn), on par with Ford. 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 on initiatives like electrification and automated driving.
Global dealmaking has picked up in the past year as Volkswagen and Ford agreed to cooperate and Fiat Chrysler 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 $16bn in Hong Kong, while Volvo targeted a range of $16bn to $32bn before it dropped its IPO plans, people familiar with the matter said at the time. Investors were only willing to pay between $12bn and $18bn, the sources said.
Volvo Car's euro bonds - maturing 2025 - advanced to 103.6, their highest intraday level since January 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.
Volvo group sold the passenger-car business to Ford 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.