Business

Geely completes Volvo acquisition

By Li Fangfang (China Daily)
Updated: 2010-08-03 13:09

Geely Chairman Li Shufu (second from left) and Lewis Booth (second from right), chief finance officer of Ford, at the signing ceremony held on Monday in London. Provided to China Daily

Deal is biggest takeover by a Chinese auto firm overseas

BEIJING - Zhejiang Geely Holding Group Co Ltd said on Monday it has completed the acquisition of the Volvo car brand from Ford Motor Co, the biggest overseas acquisition yet by a Chinese automaker.

Geely shares surged nearly 5.86 percent on Monday at the Hong Kong bourse and closed at HK$3.07 (40 cents) per share.

Ford had in March this year agreed to sell the Volvo brand to Geely for $1.8 billion. Geely on Monday said it had paid $1.3bn in cash and issued a $200m note in London to complete the sale.

Though the deal closing size is still lower than the figure arrived at by the two companies, Ford said Geely would pay the balance purchase price when the final adjustments on Volvo's value are made later this year.

Geely said in a statement that the funds for the deal were raised from Chinese institutions, internal resources and also from the international capital market.

The Chinese carmaker said the cheaper payment, as a closing consideration, reflects adjustments in areas such as pension obligations and working capital.

Geely said Stefan Jacoby, the former chief executive of Volkswagen Group in America, would become the new chief executive of Volvo from Aug 16. The new Volvo board is headed by Geely Chairman Li Shufu and has several new directors including Volvo's former president and chief executive Hans-Olov Olsson as vice-chairman.

Under the new ownership, Volvo Cars will retain its headquarters and manufacturing presence in Sweden and Belgium; and its management will have the autonomy to execute its business plan under strategic direction from the board, the Geely statement said.

As part of the transaction, Volvo and Ford will also maintain close component and supply relationships, ensuring continuity in areas where they provide supplies to each other, said Geely.

Ning Shuyong, spokesman in charge of Geely's Volvo acquisition project, said the major challenge for the Chinese company will be the integration of Volvo operations and to continue promoting the brand in Europe and emerging markets like China.

Ning said both companies would continue to operate separately in the future.

Analysts said the completion of the transaction represents only 20 percent of the Volvo deal. The Zhejiang-based automaker still has a lot of challenges ahead before it can completely finish the Volvo transaction, they said.

China Daily