Volvo Cars announces IPO plan that could price it at $ 25 billion
Volvo has announced plans to raise around 25 billion crowns, or $ 2.86 billion, through the issuance of new shares. Geely could also sell an unknown number of its shares. Volvo did not provide a target valuation of the entire company after an IPO, or indicate what percentage of stake Geely would retain. Geely has previously indicated that he will likely remain a significant shareholder after any offer.
The proceeds from the IPO will be used to fund Volvo’s efforts to transform its fleet into a fully electric fleet. It will also invest in the supply of batteries in Europe, the United States and China and in the in-house production of electric motors.
“The intention here is to secure the future of the company,” Volvo Cars chief executive Hakan Samuelsson said in an interview. “Volvo will be a manufacturer of electric cars.” The Wall Street Journal first reported that Volvo was finalizing its IPO plans and was due to disclose them as early as Monday.
One listing would represent one of the auto industry’s most dramatic turnarounds. Ford Motor Co., weakened by the global financial crisis, sold the Swedish company to Geely for $ 1.8 billion in 2010.
Volvo has long capitalized on a brand known for its safety, but at the time of its sale, its product line had failed to thrill car buyers. Geely funded Volvo’s takeover over the next decade, opening up China as a market for the brand and providing funding to help the company revamp its model offerings.
Today, Volvo is profitable, with a roadmap for the deployment of electric models ahead of some competitors. His brand is back in fashion in the United States and elsewhere. It now competes with high-end German brands, including manufacturer BMW Bayerische Motoren Werke AG, Audi brand of Volkswagen AG and Mercedes-Benz of Daimler AG.
Volvo said on Monday that its sales in the first nine months of the year had increased by 18% to 530,649 vehicles and that it planned to sell more than one million vehicles per year by the middle of the year. decade.
With a valuation of $ 25 billion, Volvo is said to be bigger than European automaker Renault SA, which has a market value of just over $ 10 billion. This is despite the fact that Volvo sells a fraction of the cars Renault sells each year. Volvo’s size, however, is said to be pale compared to the world’s largest automakers, including General Motors Co. and Volkswagen, underscoring the competitive challenge the Swedish company faces. Its value would also be far below the market cap of $ 767.5 billion of electric vehicle leader Tesla Inc.
Still, a listing would provide investors with another contender to bet on in an auto industry race to deploy electric vehicles.
Volvo was the first conventional automaker to begin phasing out internal combustion engines, ending production of cars powered solely by fossil fuels in 2019. Since then, every new Volvo has been a fully electric or hybrid model.
Most of the major automakers have since said they will phase out conventional engines in new vehicles as well, by around 2035.
Volvo pitched the idea of a possible listing as early as 2018 and said in May that it was considering an IPO on the Stockholm Stock Exchange. Such a listing could offer the company a larger shareholder base and greater independence vis-à-vis its Chinese investors.
While it is not clear which share Geely plans to sell, he has previously indicated that he will likely remain a major shareholder after any offer.
An offer would come amid a frenzy of investor interest in electric vehicles and after a Volvo subsidiary focused on electric vehicles took its own initiative to capitalize on this enthusiasm.
Last week, Polestar, a Swedish electric vehicle maker jointly owned by Volvo, Geely and others, announced plans to merge with a specialist acquisition company and register in New York as part of a deal that would value the Swedish electric vehicle company at around $ 20 billion. .
Volvo said last month that it plans to own nearly 50% of the merged company after Polestar’s merger with Gores Guggenheim Inc. is completed.
The Polestar deal allowed Volvo to continue its own offering by placing an estimated $ 10 billion worth of its stake.
“It was important to separate the problem,” said Volvo CFO Björn Annwall, adding that investors are now seeing Volvo, after abandoning its internal combustion engine manufacturing business, going electric faster. than some competitors.
“Investors see this as a clear sign that we’re not just saying we’re going to go electric, we’re doing it,” Mr. Annwall said.
Earlier this year, Volvo and Geely moved away from considerations of Volvo merging with Geely Auto Group, raising hopes that the company would pursue a separate listing and greater independence from Geely Holding.
Ford bought Volvo in 1999 for around $ 6.5 billion. At the time, Volvo had 28,000 employees and produced around 400,000 vehicles per year.
In 2009, when Ford put the company up for sale, Volvo was in trouble. After Geely intervened, he paid the money.
Over the course of a decade, Geely has invested more than $ 11 billion, funding a modernization of the company’s model lineup, an early shift to electric vehicles, and factories in China that have helped Volvo take advantage of the China’s growing appetite for Western cars.
In 2018, Volvo opened its first factory in the United States. The brand was once a household name in American suburbs in the 1970s. But it had to rebuild its business in the world’s most lucrative auto market.
Volvo produces the S60 sedan in Charleston, South Carolina Next year, the South Carolina plant plans to produce the XC90, a large, high-end electric sport utility vehicle.
Volvo has invested more than $ 1 billion in the plant and employs 1,500 people there. The company said its US plant will be the first to switch entirely to producing electric cars.
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