Volvo Cars to take full control of its Chinese business

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STOCKHOLM (Reuters) – Volvo Car Group has struck a deal to buy out parent company Geely Holding from their joint ventures in China, in a move that could make a potential initial public offering (IPO) for the Swedish automaker more attractive to investors.

Geely said earlier this year it was considering options for Volvo, including an IPO and stock market listing.

“These two transactions will create a clearer ownership structure within both Volvo Cars and Geely Holding,” Geely Holding CEO Daniel Donghui Li said in a statement, which did not refer to the possible IPO.

Analysts expect other foreign automakers to strike similar deals in China, the world’s biggest car market, when the country’s requirement for auto manufacturing to be carried out with a local joint venture partner is lifted next year.

Volvo’s deal, financial terms for which were not disclosed, will give it full ownership of its manufacturing plants in Chengdu and Daqing, its Chinese sales company and its research and development facility in Shanghai.

The Gothenburg-based company was bought by Zhejiang Geely Holding Group from Ford in the aftermath of the global financial crisis more than a decade ago, and has since shared ownership of its Chinese plants with its parent.

Volvo said the transactions, which are subject to regulatory approval, would be carried out in two steps, starting in 2022 and seen formally completed in 2023.

While always mindful of preserving its status as premium Western auto brand, Volvo’s business in China has grown rapidly and assuming full ownership of its production there could make a potential IPO more appealing to investors.

Volvo CEO Hakan Samuelsson said in June the company was making progress towards a possible IPO later in 2021, and that while it would continue to share platforms and components with Geely, they would do so at “an arm’s length distance,” consistent with the way independent companies do business.

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