Volvo Cars ready for $20 billion IPO in coming weeks, say sources

A Volvo badge and parking-assistance camera on the grille of an automobile at the Volvo Cars AB dealership in Stockholm, Sweden, Thursday, August 19, 2021.

Mikel Sjoberg | Bloomberg | Getty Images

China’s Geely Holding is in advanced discussions with banks to list its Volvo Cars unit in the coming weeks, three sources told Reuters, which is set to be one of Europe’s biggest initial public offerings (IPOs) this year. are supposed to.

Sources said Volvo Cars is targeting a valuation of around $20 billion in the Stockholm listing.

Sources said Goldman Sachs and SEB are leading the transaction, while other banks including BNP Paribas, Carnegie and HSBC are also involved in the deal.

Volvo Cars declined to comment. Geely did not immediately respond to an emailed request for comment outside of normal business hours in China. Seb and Goldman Sachs declined to comment. Other banks were not immediately available.

Geely, which bought Volvo from Ford Motor more than a decade ago in the largest acquisition by a Chinese firm of a foreign carmaker, sought to float shares in the Swedish firm in 2018, but then returned, citing trade tensions and a recession. Giving up pulled the deal. automotive stock.

Traditional carmakers have fallen out of favor in recent years, as Tesla has become one of the world’s most valuable companies, focusing on electric vehicles.

Several European firms have turned to the electric sector, including Volvo Cars, which aims to make fully electric cars only by 2030, and holds a 49.5% stake in electric car maker Polestar.

Evaluation

Gothenburg-based Volvo Cars aims to secure a valuation of around $20 billion, one of the sources said, while another mentioned a potential range of $20 billion to $30 billion.

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

A $20 billion valuation for Volvo would equate to six to seven times its earnings, a level some analysts say is high, though it would be in line with rivals Daimler and BMW. The valuation of Tesla is more than 70 times.

NordLB’s automotive analyst Frank Schwop estimates a valuation range of $10 billion to $15 billion.

“The strong margins seen in the first half of 2021 are unlikely to be sustainable as the market has benefited from a strong post-pandemic rebound, which is unlikely to continue,” Schwape said.

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

Several startups this year have taken advantage of the investor craze for electric vehicles. Rivian, which this week rolled its first electric pickup truck off the production line, will seek a valuation of about $70 billion to $80 billion when it goes public later this year, sources have told Reuters.

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

“This is important. We and many others have been really disappointed in the low liquidity at Trautan,” he said, drawing parallel to the truck unit’s 2019 IPO, in which owner Volkswagen issued 11.5% shares.

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

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