Volvo Car Group sells preference shares in step towards stock listing

Volvo Car Group, owned by a Chinese billionaire since 2010, took a step towards a public stock listing by raising 5bn kronor ($534mn) with the sale of preference shares that can be converted into ordinary stock.The Swedish luxury-car maker is diversifying funding as it invests to renew its model lineup and develop technology such as autonomous driving, the unit of Zhejiang Geely Holding Group Co said yesterday in a statement. The preference shares were bought by three Swedish investors, comprising two retirement funds – AMF and First Swedish National Pension Fund – and insurance company Folksam Group.“Volvo has been working for a while to go to a potential IPO, and we wanted to take part in that process early,” Olof Jonasson, head of equities at First Swedish National Pension Fund, said in an interview. “There’s been a big transformation in the company in the past few years.”The preparation for a listing marks a further step in the revival of the Gothenburg-based manufacturer under Chinese billionaire Li Shufu. Since the entrepreneur’s company bought Volvo from Ford Motor Co for $1.5bn six years ago, Geely has invested $11bn to modernise production facilities and overhaul its product lineup. A public listing would be an important move as it would put the company on similar footing as larger rival BMW and challenge the Swedish brand to maintain its momentum to appeal to investors.That development will become increasingly challenging amid the costs of developing self-driving and electric-car technology. Still, early returns from new models like the XC90 sport utility vehicle have been promising. Operating profit during the first nine months of 2016 rose to 7.7bn kronor, already surpassing the 6.6bn kronor generated for the whole of 2015, Volvo said.“In coming years, Volvo Cars will continue to reposition its brand to compete with its global premium rivals, revive its operations in the US and develop its global manufacturing footprint, grow further in China and double its market share in Europe,” Volvo said in the statement. “Today’s move is another step towards Volvo Cars’ long expressed ambition to act as a listed company.”The sale of preference shares, which can also be repurchased by Volvo Cars, will have a minimal effect on Geely’s holding in the company. Volvo has an estimated market value of about 78bn kronor, according to Evercore ISI.No decision has been taken on when or if to proceed with a public listing, Volvo said. But the company has been increasingly moving toward investors. In May, it conducted its first bond sale, raising €500mn ($519mn) from institutional investors and followed that by selling 3bn kronor in bonds to Swedish investors in November.The preference shares have no fixed conversion date, Anders Oscarsson, AMF’s head of equities, said in an interview, adding the fund would take part in similar sales in the future to gain a bigger stake in “a well-rounded company.”