Geely’s expertise in the Chinese market and skills in developing electric and autonomous vehicles should help the truckmaker to expand, although there were no plans to reunite with Volvo Cars, which was split from AB Volvo in 1999.
AB Volvo owns 45 percent of Dongfeng Commercial Vehicles, one of China’s largest truckmakers, and also has a significant construction equipment business in China.
“Given our experience with Volvo Car Group, we recognise and value the proud Scandinavian history and culture, leading market positions, breakthrough technologies and environmental capabilities of AB Volvo,” Geely Holding chairman Li Shufu said in a statement on Wednesday.
There are “no plans to merge” the two Volvos, a Geely spokesman confirmed when contacted. Both companies are based in Gothenburg, Sweden’s second largest city.
The value of the investment amounted to around 27.2 billion Swedish crowns (US$3.26 billion), a Reuters calculation showed.
Swedish daily Dagens Nyheter said Geely paid 3.25 billion euro for the stake, citing a source with knowledge of the deal. Geely and Cevian declined to disclose the exact value of the transaction.
The deal makes Geely the biggest individual shareholder in AB Volvo and second ranked in terms of voting rights behind Swedish investment firm Industrivarde.
“We will treat the new owners in the same way that we treat our other shareholders,” a spokesman for AB Volvo said.
The transaction was initiated at Geely’s request, said Cevian co-founder Christer Gardell. “This has been a very profitable investment for us, we have made almost 20 billion Swedish crowns on this one,” Gardell added, referring to an involvement that began in 2006.
Cevian will use the proceeds for new investments, and it is currently buying into another company, Gardell added.
Volvo has also begun to reap the benefits from years of restructuring measures, including major cost-cutting programs, selling off non-core businesses, and management changes.
Cevian had called for a break-up of the company, suggesting the smaller Volvo Construction Equipment and engine and technology firm Volvo Penta should be separated from the main truck making business.
Zhejiang Geely Holding Group, as the company is formally known, is the parent company of Geely Automobile Holdings Ltd. It also owns the company that makes London’s black cabs and has invested in sports carmaker Lotus.
Sales and profitability at Volvo Cars has jumped under Geely. The car business made an operating profit of 10.4 billion Swedish crowns in the first nine months this year, up from 1.6 billion for the whole of 2011, the year after Geely bought Volvo from Ford.
In a sign of its ambitions, the Chinese company last month offered to take a stake of up to 5 percent in Daimler via a discounted share placement but was rebuffed, according to sources with knowledge of the talks.
