Geely closes in on Volvo takeover

Geely closes in on Volvo takeover
Li Shufu, owner and founder of Zhejiang Geely Holding Group
Chinese Geely representatives will arrive in Sweden over the weekend to complete the $1.8 billion purchase of Volvo Cars from Ford, on either Sunday or Monday, according to the Financial Times.

The only factor that could throw a spanner into the works is a battle over a loan from the European Investment Bank (EIB).

The newspaper cites three sources close to the deal. According to one of them, half of the purchase is financed by loans from European banks, of which around $500 million comes from Swedish banks. The remainder of the financing will come from China.

China’s vice-president Xi Jinping is expected to pay a visit to Sweden on Saturday, and the contracts are expected to be undersigned either on Sunday or on Monday, according to one of the newspaper’s sources.

The aforementioned EIB loan could be a potential problem, according to one of the sources, in the instance that a European competitor objects to the provision of loans to a state-supported firm.

“My understanding is that Geely is a state-supported company and in that sense it is the Chinese state which is buying Volvo,” said Lars Holmqvist CEO of automotive parts supplier Clepa, to Dagens Industri (DI).

Holmqvist questions if Geely has a right to state-guaranteed loans.

Hans Lindblad, state secretary at the finance department, also holds reservations. He told DI that it is not “a matter of course that a Chinese state-backed firm would be approved for this type of loan,” referring to the four billion kronor ($556 million) in loans that the EIB has granted Volvo Cars.

Member comments

Become a Member to leave a comment.Or login here.