Chinese car maker Geely has agreed to pay Euro 3.25 billion for European activist fund manager Cevian's 8.2% shareholding in Swedish truck and heavy vehicle manufacturer AB Volvo. On completion Geely will become the AB Volvo’s biggest shareholder.

Zhejiang Geely Holding Group (Geely), China’s leading privately owned automotive group, has reached an agreement with European activist fund manager Cevian Capital to acquire its entire 8.2% shareholding (and 15.6% voting rights from a mixture of A shares and B shares) in AB Volvo, the leading Swedish manufacturer of trucks, buses, construction equipment, diesel engines, and marine and industrial engines.

Hangzhou based Geely already owns the Volvo Car Group, which it acquired from Ford Motor Company in 2010.

The agreement was signed on December 27 by Daniel Donghui Li, Chief Financial Officer and Executive Vice President of Geely Holding, and Cevian, in the presence of Christer Gardell, co-founder of Cevian. On completion and following necessary regulatory approvals, Geely Holding will become the largest holder of AB Volvo’s share capital.

Under the terms of the agreement reached, Cevian Capital has agreed to sell all of its 88.47 million A-shares and 78.77 million B-shares in AB Volvo to Nomura International and Barclays Bank. The two Nomura have committed to sell all the shares to Geely Holding, and Geely Holding has committed to acquire the shares following necessary regulatory approvals.

The Chinese M&A wave slowed down in 2017, as the authorities clamped down on capital leaving the country. But with President Xi Jinping now underway with his second five year term, activity is expected to speed up again in 2018.

The government is however discouraging investment in trophy assets such as hotels, real estate and football teams. In contrast, deals that add technological expertise in areas such as high tech manufacturing fall within the range of transactions that are likely to win the approval of the authorities. The Geely Volvo deal is a good example of this.

“We are delighted to have reached agreement with Cevian to acquire its holding in AB Volvo, making us the largest holder of share capital in a company that leads the world in many aspects of commercial vehicle development, manufacturing and sales", said Geely Holding Chairman Li Shufu.  

Daniel Donghui Li, Chief Financial Officer and Executive Vice President of Geely Holding, added that "Geely Holding is a well-recognised strategic long-term investor, and as such we aim to contribute positively to the long-term development of AB Volvo. Geely Holding will be able to contribute its global knowledge, Chinese market expertise and leading research and development capabilities especially in the fields of electrification, autonomous driving and connectivity, to AB Volvo to further its global development, and strengthen the Volvo brand.”

Zhejiang Geely Holding Group has ambitions to become one of the top ten global automotive groups by creating environmentally friendly and energy efficient automobiles.

Geely has over 70,000 employees, including 30,000 at Geely Auto, 31,000 at Volvo Cars, 10,000 at PROTON, 1,000 in Lotus, and 1,000 at the London Taxi Company. With total assets of over RMB100 billion ($14.4 billion), the company has been a member of the Fortune Global 500 for six consecutive years.

In 2016, Volvo Cars sold a total of 534,332 units, the company’s third consecutive year of record sales.

PROTON Cars is the national car brand of Malaysia. Established in the early 1980’s at the behest of the Malaysian government and later reverted to semi-private ownership under DRB-HICOM, it quickly became a globally recognized brand with exposure in Europe, Southeast Asia, Latin America, and Russia. In 2017, Geely Holding Group acquired a 49.9% stake in the PROTON, becoming the brand’s strategic partner.

In 2017 Geely acquired a majority stake in Lotus Cars, the iconic British sports and racing car brand founded in 1952.

Geely Commercial Vehicle (GCV) is a new energy commercial vehicle company that acts as a holding company to two core brands-the London Electric Vehicle Company (LEVC) and Yuan Cheng Auto.