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Volvo $2.9 Billion IPO Marks Key Test in Electric Car Shift

A Volvo XC40 Recharge electric SUV at a Volvo Cars AB dealership in Stockholm, Sweden, on Thursday, Aug. 19, 2021. Volvo Cars said its considering an initial public offering months after calling off earlier plans to merge with Geely Automobile Holdings Ltd., the Chinese manufacturer owned by its parent.

(Bloomberg) —

Volvo Car AB is looking to raise 25 billion kronor ($2.9 billion) in a Stockholm initial public offering in a test for automakers amid the sector’s transition to electric vehicles.

The Swedish carmaker, owned by China’s Zhejiang Geely Holding Group Co., is offering shares at 53 kronor to 68 kronor each, according to a statement Monday. 

The deal values Volvo Cars at as much as $23 billion, 11 years after the Chinese firm bought the business from Ford Motor Co. for $1.8 billion. The IPO is set to be Europe’s largest since January, according to data compiled by Bloomberg.

The carmaker, with an ambitious plan to only sell full electric cars by 2030, plans to use the funds to add carmaking capacity so it can nearly double annual sales to more than 1.2 million vehicles. Volvo Cars also plans to construct a battery plant in Europe.

“We have a very clear strategy to be an electric company in 2030 and we’ve been on that journey for some years now,” Volvo Cars CEO Hakan Samuelsson said in an interview. “With this, of course, we can secure that transformation, because of course, it’s not free of charge.”

Volvo Cars CEO Hakan Samuelsson.

Volvo’s projected market capitalization of about $20 billion compares to roughly $65 billion for BMW AG, while the German premium carmaker produces more than 2 million vehicles versus Volvo Cars’ 660,000 last year. Newer entrants to the industry such as China’s Nio Inc. and Tesla Inc. have seen their share prices surge past traditional manufacturers even as they sell only a fraction of the number of vehicles.

The IPO also comes less than a month after electric-vehicle maker Polestar, controlled by Volvo Cars and Geely, said it will go public in New York via a blank-check merger. The deal implies an enterprise value of $20 billion for the startup, with Volvo Cars expecting to hold a 50% stake in Polestar after it lists.

While the century-old Swedish industry stalwart and Polestar have similar valuations, four-year-old Polestar has a target of delivering only about 29,000 cars this year.

Read More: Volvo Cars Needed a Chinese Parent to Finally Hit Its Stride

Geely previously attempted to take Volvo Cars public in 2018, but called off the listing after investors were said to balk at its valuation expectations of as much as $30 billion. 

A group of pension funds and institutional investors have committed to buying 6.4 billion kronor worth of shares in the IPO.

The offering of as much as 21% of Volvo Cars runs through Oct. 27, and the shares are set to start trading in Stockholm on Oct. 28.

Goldman Sachs Group Inc. and SEB AB are global coordinators on the IPOs, alongside bookrunners Morgan Stanley, BNP Paribas SA, HSBC Holdings Plc, JPMorgan Chase & Co. and Nordea Bank Abp. Carnegie Investment Bank and Swedbank AB are co-lead managers.

The IPO is set to be Europe’s biggest since Polish parcel-locker provider InPost SA’s 2.8 billion-euro offering in January.(Updates with CEO comment in fifth paragraph.)

© 2021 Bloomberg L.P.

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