Revised Volvo pact better serves investors, Geely says

Geely Automobile CEO Gui Shengyue talked up the decision not to pursue a full merger with Volvo Cars, saying on an investor call that shareholders’ interests are better served if the two companies remain as standalone entities.

The difficulty of coming up with a fair valuation for Volvo acceptable to both Geely investors and Volvo was one of the main reasons that led to the change of plan, Gui said on Thursday.

Geely investors wanted a valuation on the lower side and even if Geely Chairman Li Shufu had agreed to that, Sweden’s government and Volvo’s union would have been against it because of the potential damage it could cause to Volvo’s brand, Gui said.

“Geely and Volvo are like brothers who are bound together for good and ill,” said Gui. “Any damage to the Volvo brand caused by a merger won’t benefit Geely either.”

Hong Kong-listed Geely Auto and its Swedish affiliate said Wednesday they are putting off earlier plans to merge, wagering they will be more agile apart. While the two car manufacturers will preserve their separate corporate structures, they will cooperate more closely on electrification, software and autonomous-driving technology, and new listings could be on the table.

Geely Auto’s parent, Zhejiang Geely Holding Group, acquired Volvo from Ford Motor for just $1.8 billion in 2010, when the U.S. automaker was recovering from the global financial crisis. Bloomberg Intelligence analysts estimated in December that Volvo could be valued in the range of $8.1 billion and $11.6 billion.

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