China’s Geely Holding is in advanced discussions with banks to list its Volvo Cars unit in the coming weeks, three sources told Reuters, in what is expected to be one of Europe’s biggest initial public offerings (IPOs) this year.
Volvo Cars is aiming for a valuation of about $20 billion in the planned Stockholm listing, the sources said, with one saying the launch was penciled in for the end of September.
Goldman Sachs and SEB are leading the transaction, while other banks including BNP Paribas, Carnegie and HSBC are also involved in the deal, the sources added.
Volvo Cars declined to comment. Geely did not immediately respond to an emailed request for comment outside normal business hours in China. SEB and Goldman Sachs declined to comment. The other banks were not immediately available.
Geely, which bought Volvo from Ford Motor more than a decade ago in the biggest acquisition by a Chinese firm of a foreign carmaker, sought to float shares in the Swedish firm in 2018 but pulled the deal, citing trade tensions and downturn in automotive stocks.
Traditional carmakers have fallen out of favour in recent years, as Tesla has risen to be one of the world’s most valuable companies, putting the focus on electric vehicles.
Many European firms have pivoted towards the electric sector, including Volvo Cars which aims to only make fully electric cars by 2030 and owns a 49.5% stake in electric carmaker Polestar.
Gothenburg-based Volvo Cars aims to secure a valuation of roughly $20 billion, one of the sources said, while another mentioned a possible range of $20 billion to $30 billion.
A third source suggested a $16 billion valuation was more realistic, citing the firm’s revenue outlook.
A $20 billion valuation for Volvo would be equivalent to six to seven times its earnings, a level some analysts say is high, although it would put it in line with rivals Daimler and BMW. Tesla’s valuation is more than 70 times.
NordLB’s automotive analyst Frank Schwope estimated a valuation range of $10 billion to $15 billion.
“The strong margins seen in the first half of 2021 are unlikely sustainable as the market benefited from a strong post-pandemic rebound that is unlikely to continue,” Schwope said.
For Geely’s Founder Li Shufu, who bought Volvo for $1.8 billion, the listing is a milestone on the road to transport of the future, where cars are part of an electrified network of mobility services generating data and business opportunities.
Published in The Express Tribune, September 16th, 2021.
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