Volvo Cars drops IPO citing trade tensions and downturn
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[September 10, 2018]
BEIJING/PARIS (Reuters) -
Volvo Cars and its owner Geely said on Monday they had postponed plans
to float shares in the Swedish carmaker, blaming trade tensions and a
downturn in automotive stocks.
Volvo said plans for a listing in Stockholm had been delayed
indefinitely, a move first reported by the Financial Times.
The postponement came as Britain's Aston Martin vowed to press ahead
with its own flotation.
"We've come to the conclusion that the timing is not optimal for an IPO
right now," Volvo Chief Executive Hakan Samuelsson told Reuters in a
Volvo and its Chinese parent had been discussing an initial public
offering to value the carmaker at between $16 billion and $30 billion,
sources have previously said. The company said on Monday a listing was
still possible in the future.
But Samuelsson said IPO prospects had dimmed with the business cycle,
amid a broad-based decline in automotive shares that has dragged the
Stoxx 600 Autos & Parts index <.SXAP> 15 percent lower so far this year.
Even before the recent sector sell-off, however, some observers were
dubious about the $30 billion upper end of Volvo's target valuation.
"We had expressed our reservations concerning lofty valuation ambitions
before," Evercore ISI analyst Arndt Ellinghorst said on Monday. "Trade
wars are just one red flag."
Washington's escalating trade spat with Beijing and tensions with Europe
have rattled automotive investors, hitting share prices and adding
volatility to market outlooks.
Volvo is less exposed than its German premium rivals to U.S.-China
tariffs, however, and has said it will juggle production of its XC60 SUV
to reduce their impact.
Geely, which paid Ford Motor Co <F.N> $1.8 billion for Volvo in 2010,
also has stakes in Mercedes-Benz parent Daimler <DAIGn.DE>, truckmaker
AB Volvo <VOLVb.ST> and Lotus.
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The logo of Geely Automobile Holdings is pictured at the Auto China
2016 auto show in Beijing, China April 25, 2016. REUTERS/Kim Kyung-Hoon
Geely and its boss Li Shufu concluded that Volvo should make deeper inroads into
the Chinese market before listing, a person familiar with the group's thinking
Volvo delivered 61,480 cars in China in the first half, a fraction of BMW's <BMWG.DE>
or Audi's <VOWG_p.DE> sales.
Volvo, which is developing Polestar as an electrified performance brand and owns
a stake in Geely stablemate Lynk&Co, has "other alternatives" to raise finance
in future, CEO Samuelsson said on Monday.
The IPO postponement reflects bigger concerns about "price development after a
potential IPO" rather than about the initial valuation, he maintained - citing
sensitivities over the prevalence of public pension funds among Swedish
institutional investors likely to participate.
Amid growing market uncertainties, the Volvo CEO said, "what made me nervous
especially was leaving headroom for investors."
Samuelsson said Aston Martin, as a pure luxury play, was "more like Ferrari" -
whose widely envied listing came close to late boss Sergio Marchionne's
10-billion-euro target valuation. Like Volvo, Aston Martin was once owned by
"I wish them luck with their IPO," Samuelsson said.
(Reporting by Norihiko Shirouzu and Laurence Frost; Additional reporting by Esha
Vaish in Stockholm and Mekhla Raina in Bengaluru; Writing by Adam Jourdan;
editing by Edwina Gibbs and Jason Neely)
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