Volvo Cars gears up for $ 20 billion IPO in coming weeks, sources say, Auto News, ET Auto

STOCKHOLM – Chinese company Geely Holding is in advanced talks 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 largest IPOs This year.

Volvo Cars is targeting a valuation of around $ 20 billion in the planned stock exchange listing in Stockholm, the sources said, with one saying the launch was slated for late September.

Goldman Sachs and SEB are leading the deal, 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 a request for comment sent by email outside of normal business hours in China. SEB and Goldman Sachs declined to comment. The other banks were not immediately available.

Geely, who bought Volvo from Ford Motor more than a decade ago as part of a Chinese company’s largest acquisition of a foreign automaker, sought to introduce shares in the Swedish company in 2018, but has then withdrew the deal citing trade tensions and an auto slowdown. actions.

Traditional automakers have fallen out of favor in recent years, as Tesla has grown into one of the world’s most valuable companies, with a focus on electric vehicles.

Many European companies have turned to the electric sector, including Volvo Cars, which aims to manufacture only fully electric cars by 2030 and has a 49.5% stake in electric car maker Polestar.

EVALUATION

Gothenburg-based Volvo Cars is aiming for a valuation of around $ 20 billion, one source said, while another cited a possible range of $ 20 billion to $ 30 billion.

A third source suggested that a valuation of $ 16 billion was more realistic, citing the company’s revenue outlook.

A $ 20 billion valuation for Volvo would be six to seven times its profits, a high level some analysts say, even if that would put it in line with rivals Daimler and BMW. Tesla’s valuation is over 70 times.

NordLB automotive analyst Frank Schwope estimated a valuation range of $ 10 billion to $ 15 billion.

“The strong margins observed in the first half of 2021 are not sustainable, as the market has benefited from a strong post-pandemic rebound which is not expected to continue,” said Schwope.

For Geely founder Li Shufu, who bought Volvo for $ 1.8 billion, the announcement is a milestone on the transportation route of the future, where cars are part of an electrified network of mobility services. generating data and business opportunities.

Many startups have taken advantage of the investor frenzy for electric vehicles this year. Rivian, who took their first electric pickup off the production line this week, will request a review https://www.reuters.com/business/autos-transportation/amazon-backed-rivian-seeking-70-80-billion- 2021-08-27-ipo-source-valuation of around $ 70 billion to $ 80 billion when it goes public at the end of this year, sources told Reuters.

Nordea’s chief investment officer John Hernander said the bank was interested in buying Volvo shares if a large enough part of the company was sold to keep liquidity high.

“This is the key. We and many others were really disappointed with Traton’s low liquidity,” he said, drawing a parallel with the 2019 IPO of the truck unit, in which the Volkswagen owner issued 11.5% of the shares.

Volvo this month warned that sales volumes in the second half of 2021 could drop year on year after being forced to cut production due to material shortages.

The automaker, owned by Chinese company Geely Holding, said its sales fell 10.6% from a year ago in August, despite strong underlying demand, and warned that the potential decline volumes in the second half could have an impact on revenues and profits.

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