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Geely, citing trade uncertainty, postpones Volvo IPO
Reuters | 2018/9/11

BEIJING -- Volvo Cars and its owner, Zhejiang Geely Holding Group, are postponing plans to float shares in the Swedish carmaker, blaming global 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.

"We have come to the conclusion that the timing is not optimal for an IPO right now," Volvo CEO Hakan Samuelsson said.

Volvo and its Chinese parent had been discussing an initial public offering to value the carmaker at between $16 billion to $30 billion, sources have previously said. The company said on Monday a listing was still possible in the future.

But Samuelsson said the prospect of an IPO had dimmed with the business cycle, amid a broad-based decline in automotive shares that has dragged the Stoxx 600 Autos & Parts index 15 percent lower so far this year.

Even before the recent 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, depressing share prices and adding volatility to the outlook for automakers, industry sales and profits.

Volvo is less exposed than its German luxury rivals to U.S.-China tariffs, however, and has said it will juggle production of the XC60 SUV to reduce their impact.

Geely, which paid Ford Motor Co. $1.8 billion for Volvo in 2010, also has stakes in Mercedes-Benz parent Daimler, truckmaker AB Volvo and U.K. sports-car maker Lotus.

China key
Geely and its boss Li Shufu also concluded that Volvo should make deeper inroads in the Chinese market before listing, a person familiar with the group's thinking told Reuters. Volvo delivered 61,480 cars in China in the first half, a fraction of sales by rivals Mercedes-Benz, BMW and Audi.

Volvo, which is developing Polestar as an electrified performance brand and owns a stake in Geely stablemate Lynk & CO, has "other alternatives" to raise capital, Samuelsson said on Monday.

The postponement of the IPO 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."

The delay in Volvos IPO came as Britain's Aston Martin said it will press ahead with its own stock offering. 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 Ford.

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