Geely acquires strategic stake in AB Volvo

Geely acquires strategic stake in AB Volvo

Under the terms of an agreement signed by Daniel Donghui Li, Chief Financial Officer and Executive Vice President of Geely Holding and Cevian in the presence of Christer Gardell, co-founder of Cevian, Geely Holding has committed to acquire Cevian's 88.47 million A-shares and 78.77 million B shares in AB Volvo, a press release from Geely reads.

The Chinese owner of Sweden's Volvo Cars is buying a stake in truck manufacturer AB Volvo, expanding a portfolio of vehicle brands that includes shares in Malaysia's Proton and Britain's Lotus.

The transaction will make Geely the biggest single shareholder in Volvo and the second biggest holder of voting rights.

Earlier this month, China Central Television reported that Geely is interested in acquiring a 3% to 5% stake in Germany's Daimler AG, the parent company of Mercedes-Benz, for about 4 billion euros ($4.7 billion).

The Reuters article also noted that AB Volvo owns 45 percent of Dongfeng Commercial Vehicles, one of China's largest truck makers.

"We will treat the new owners in the same way that we treat our other shareholders", a spokesman for AB Volvo said.

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The value of the transaction was not revealed. AB Volvo is now leading the industry into a new era.

However, Volvo shares have gained nearly 50 percent this year as it and rivals in the truck industry such as Germany's Daimler (DAIGn.DE) and Volkswagen (VOWG_p.DE) hit a sweet spot thanks to robust demand in major markets.

Geely bought up legendary British auto maker Lotus earlier this year and a USA startup developing flying vehicle technology.

Shares of its Hong Kong-listed subsidiary Geely Automobile Holdings gained 0.6 per cent to HK$25.8 (US$3.30) on Wednesday, jumping 254 per cent from the close of previous year.

Volvo has also begun to reap the benefits from years of restructuring measures, including major cost-cutting programs, selling off non-core businesses, and management changes. Industrivarden controls 22.8 percent of the votes.

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