China’s Geely hires three investment banks to float Volvo

Dual listing in Sweden and Hong Kong under consideration

Zhejiang Geely Holding Group, the owner of Volvo Cars, has appointed three global investment banks to lead the Swedish carmaker's initial public offering this year, according to people close to the deal.

China-based Geely has appointed Goldman Sachs, Morgan Stanley and Citigroup as joint global co-ordinators to run the IPO, potentially fetching a value between $15 billion (€12.6 billion) and $30 billion, two people familiar with the plans said. The banks declined to comment.

The bank hires were first reported by Bloomberg.

Arndt Ellinghorst, analyst at Evercore ISI, said a valuation of even $16 billion would see the company trade higher than BMW or Daimler on an enterprise-value-to-earnings multiple.


He said Volvo “won’t be immune to the challenges [to adapt to trends towards electrification and digitalisation] that drag down valuations of traditional premium [carmakers]”.

Shares in Hong Kong-listed Geely, a subsidiary of the holding group, were up as high as 4.4 per cent on Friday morning in Asia trading, at HK$23.70.

A person close to the matter said one option considered by Geely was a dual listing in Sweden and Hong Kong. However, he said that it was still possible for a private equity company to swoop in on the carmaker.

“We are looking at the possibilities,” said a Geely spokesperson. “We haven’t made a final decision on how to proceed as of yet.”

Li Shufu, the chairman of Geely, is seeking to build the company into a global group with brands in every segment of the market.

First-quarter profit

Zhejiang Geely acquired Volvo from Ford in 2010 for $1.8 billion. The carmaker reported a dip in first-quarter profit and warned that spending on marketing and research would weigh on the carmaker’s profits this year.

Volvo saw car sales rise 14 per cent to 147,407 units in the first quarter, but net income slipped 1.8 per cent to SKr2.6 billion (€253 million). Revenues climbed 18.9 per cent to SKr56.8 billion.

Analysts have long speculated that Volvo will list. However, Volvo chief executive Hakan Samuelsson said last year there were no immediate plans for an IPO.

“I work to improve the company and create value for the shareholder,” he said, adding a decision on the IPO was up to Mr Li. “It’s nothing I could have an opinion or view on.”

Under Geely, the company has expanded and has become a global player in the premium car market.

The company was recently on the acquisition trail. Geely acquired close to 10 per cent of the shares in Mercedes-Benz owner Daimler earlier this year, to become the biggest shareholder in the company.

At the end of last year, Geely took a controlling stake in Lotus, the premium British carmaker.

Geely also invested in Danish group Saxo Bank earlier last year, marking its first foray into financial services. – Copyright The Financial Times Limited 2018