Zhejiang Geely Holding Group Co. is set to become the largest shareholder in Swedish truckmaker Volvo after activist investor Cevian Capital decided to sell its stake.
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% of the capital and 15.6% of the votes, the companies said Wednesday. The deal is valued at about $3.85 billion, people familiar with the matter said, verifying a figure reported earlier by Swedish newspaper Dagens Nyheter.
With the purchase, Geely — which already owns the Volvo Cars brand that Volvo sold almost two decades ago — is making its first foray into the heavy truck and bus segment, and it's extending its effort to bulk up outside of China. In September, Geely bought a 49.9% stake in Malaysia's Proton Holdings as well as 51% of British sports-car maker Lotus Cars.
Geely, owned by Chinese billionaire and founder Li Shufu, bought the Volvo Cars nameplate from Ford 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 to enhance the truckmaker's electrification, autonomous driving and connectivity, technologies that it has been developing at the car operation. In addition to its namesake heavy-vehicle brand, Volvo's brands include Mack, Renault Trucks and UD.
Volvo's Class B shares fell 2.9% on Wednesday in Stockholm.
Cevian has long wanted Volvo, Europe's second-biggest maker of commercial vehicles, to take steps such as divesting its construction-equipment business to streamline. Although no large restructuring along those lines emerged, Volvo 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, 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.
Joakim Kenndal, a spokesman at Gothenburg-based Volvo, said the stake sale "came as a surprise," declining to comment further because the deal is a matter for the shareholders. Geely spokesmen declined to comment on the transaction beyond the company statement.
Cevian has one seat on the Volvo board, held by Eckhard Cordes, a partner at the investment firm and a former executive at Daimler. Hakan Samuelsson, the chief executive 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, which is the country's largest company by revenue. "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% voting control in Volvo, the manufacturer's Class B stock returned 181%, including dividends, through Friday. Sweden's benchmark OMX Stockholm 30 Index returned 135% in the period. Gardell estimated that Cevian's holding over 11 years and the stock's sale have earned the investment company about $2.4 billion.
Nomura Holdings and Barclays agreed to buy Cevian's stake in Volvo and sell it to Geely once the purchase has regulatory approval, the carmaker said.
Ek and Lavell write for Bloomberg.