Zhejiang Geely Holding Group (吉利控股集團) signed a binding deal on Sunday to buy Ford Motor Co’s Volvo Cars unit for US$1.8 billion, representing a coup for the independent Chinese automaker, which is aiming to expand in Europe.
The stock purchase agreement is subject to regulatory approvals and is expected to be completed in the third quarter, representatives of the two automakers said as they presented the deal at a news conference at Volvo Cars headquarters in Goteborg, on Sweden’s west coast.
The agreement was signed by Geely chairman Li Shufu (李書福) and Ford chief financial officer Lewis Booth and witnessed by Chinese Minister of Industry and Information Technology Li Yizhong (李毅中) and Swedish Minister for Enterprise and Energy Maud Olofsson.
The transaction will be made through a US$200 million note, while the remainder will be paid out in cash, Booth said at the Web cast news conference.
“We think it’s a fair price for a good business, and yes, we’re happy with the deal we’ve achieved with Geely,” he said, adding that his company believed that, under Geely, “Volvo can continue to build its business and return to profitability.”
The deal also covers further agreements on intellectual property rights, supply and research and development arrangements between Volvo Cars, Geely and Ford.
Li, whose comments were translated by an interpreter, described the deal as “a milestone” for both Geely and Volvo, adding that his group would make a Volvo CEO public “in due course.”
In a statement, Geely said it has secured all the financing necessary to complete the deal, as well as “significant working capital facilities to fund Volvo Cars’ ongoing business.”
Geely said it aimed to keep Volvo’s existing manufacturing facilities in Sweden and Belgium, but that it would also explore manufacturing opportunities in China.
“China, the largest car market in the world, will become Volvo’s second home market. Volvo will be uniquely positioned as a world-leading premium brand, tapping into the opportunities in the fast-growing China market,” Li said.
Ford, which bought Volvo Cars from AB Volvo in 1999 for US$6.45 billion, has been trying to sell the unit since late 2008 to focus its resources on managing its core Ford, Lincoln and Mercury brands.
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