China’s Geely puts brakes on Volvo Cars listing, trade war a concern

September 10, 2018 | By | Reply More

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The logo of Geely Automobile Holdings is pictured at the Auto China 2016 auto show in Beijing, China April 25, 2016. (Reuters pic)

BEIJING: Chinese carmaker Geely is delaying plans to list Volvo Cars due to uncertainties created by escalating trade tensions and the need to bolster the Swedish brand’s presence in China, said a person familiar with the matter.

Geely, which is led by magnate Li Shufu and has been one of China’s most aggressive dealmakers in the auto sector, also felt that listing the unit soon would make it difficult to realise its full valuation potential, the person said.

“It was like half-baked bread,” said the person said, who was not authorised to speak publicly on the matter and declined to be identified.

Geely had been planning a public float that could have valued the Swedish carmaker at between $16 billion and $30 billion, a separate source familiar with the matter has said.

Trade tensions between China and the United States as well as trade friction hitting Europe have created an uncertain business environment and were a key consideration in the decision to postpone, the person familiar with the matter said.

Volvo is still too weak in China, the person added. Its sales are roughly 100,000 units a year in a market where BMW, Audi and Mercedes-Benz can individually sell 500,000 a year easily.

Hangzhou-based Geely is also under no pressure to go to market, the person added.

“Geely sales are booming and it makes a ton of money. Why IPO?” the person said. “Geely was never in a rush to take Volvo public.”

Geely’s decision to postpone Volvo’s listing was first reported earlier on Monday by the Financial Times. It said Geely worried that investors, many of whom were expected to be Swedish pension funds, would see the stock slip after the float.

Volvo Cars Chief Executive Hakan Samuelsson told the newspaper that “conditions right now are not optimal to give certain upside for the investors” and “stable market conditions” were needed for a listing.

Geely took over Volvo Cars from Ford Motor Co in a $1.8 billion deal in 2010. It also has stakes in Germany’s Daimler, truck maker AB Volvo and sports car maker Lotus.

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