Carmakers Volvo Cars and Geely abandon merger plans

By Rahul Vaimal, Associate Editor
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Chinese multinational company Geely and its Swedish sister company Volvo Cars have canceled plans to merge, wagering on the belief that they will be more agile as standalone entities.

According to a statement, the manufactures will retain their separate corporate structures while working more closely on electrification, software, and autonomous-driving technology.

Speaking about the realignment from both firm’s Volvo Cars’ Chief Executive Officer Mr. Hakan Samuelsson remarked that ”Geely and Volvo also will move their powertrain activities into a separate company, which will enhance focus on the development of electric vehicles. Daimler joining the business would be positive”.

The German carmaker which counts Geely owner Li Shufu as its biggest shareholder had earlier in November revealed plans to jointly build a gasoline engine that could be electrified later.

After having decided against a merger with Geely, Volvo Cars will now pursue a listing of its own.  After receiving early feedback from investors suggesting that they would have given a lower-than-expected valuation for the firm, it began planning for an initial public offering in 2018.

Mr. Samuelsson states that it’s important to have the possibility to reach out to equity markets as a standalone company.

In 2010, when the US carmaker was emerging from the global financial crisis, Geely Auto’s parent Zhejiang Geely Holding purchased Volvo from Ford Motor for just $1.8 billion. In December, Bloomberg Intelligence analysts estimated that Volvo could be priced in the range of $8.1 billion and $11.6 billion.

Mr. Li Geely Holding’s Chairman and Founder, has been forging ties with a wide range of companies to stay on two major industry shifts: electrification and automation. Geely agreed to pacts with search-engine heavyweight Baidu, Apple’s Taiwanese manufacturing partner Foxconn Technology Group and Tencent Holdings early this year.

Vehicle platforms, software stack advanced connectivity will be shared by Geely and Volvo. Volvo will also make use of its distribution and service network to carry out the Lync & Co brand globally, which it jointly owns with Geely. The carmaker headquartered in Gothenburg, Sweden, expects to make up half of the global sales of fully electric vehicles by 2025.

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