Volvo to list shares next week targeting $23bn valuation

Volvo Cars will list its shares next week in an offering that could value the Chinese-owned premium carmaker at up to $23bn.

The Swedish carmaker is expecting to raise up to SKr34bn ($3.9bn), with its shares due to start trading on October 28.

Volvo will have a free float of 17-21 per cent after the offering but will continue to be controlled by Chinese carmaker Zhejiang Geely, which currently owns 98 per cent of the shares and is set to retain 97 per cent of the voting rights even after the offering.

Hakan Samuelsson, Volvo chief executive, said the Gothenburg-based carmaker would use most of the IPO proceeds to fund its push to only sell electric vehicles by the end of this decade, while a smaller part would boost its manufacturing capacity and ability to sell cars directly to customers.

“As a listed company, our ambition must combine becoming our industry’s fastest transformer and creating value for our shareholders,” he added.

The turnround of Volvo, which was sold by Ford Motor to Geely in 2010 for $1.8bn, is a big success story for Chinese ownership as the deal was one of the country’s largest overseas acquisitions.

But Volvo’s listing comes as tensions grow between China and the US and parts of Europe. A previous listing in 2018 was shelved because of fears that a trade war between China and the US could hurt its ability to reach the $30bn valuation Geely believed it merited.

Volvo’s IPO is set to be priced at SKr53-SKr68 per share, giving the carmaker a market capitalisation of SKr163bn-SKr200bn ($19bn-$23bn). Polestar, the lossmaking electric car brand half-owned by Volvo that only sold 10,000 vehicles last year, is set to list in 2022 through a special purpose acquisition company at a valuation of $20bn.

People close to the carmaker suggested it was pricing its offering carefully to ensure upside for new investors. Volvo said it had secured backing from several Nordic pension funds and asset managers as cornerstone investors for about SKr6.4bn of the offering. Current minority owners AMF and Folksam will convert their preference shares into normal shares, contributing SKr5.3bn to the IPO.

Volvo has long lagged behind larger premium carmakers such as Audi, BMW and Mercedes in terms of sales and profit margins. The Swedish group sold about 740,000 cars in the year to the end of September, less than half the level of its German rivals. But it aims to sell 1.2m by the middle of this decade.

Critical to its success will be its transformation to electric cars, one of the fastest of all traditional manufacturers. Volvo announced in June it would build a battery gigafactory with Swedish start-up Northvolt to produce enough electric packs to power 500,000 cars a year from 2026.

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