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Volvo cars IPO draws lower valuations in initial feedback

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Initial investor feedback has valued Volvo Cars far below owner Zhejiang Geely Holding Group Co's top-end estimates for a potential listing, people familiar with the matter said.

[HONG KONG] Initial investor feedback has valued Volvo Cars far below owner Zhejiang Geely Holding Group Co's top-end estimates for a potential listing, people familiar with the matter said.

Institutional investors have indicated the Swedish carmaker is worth about US $12 billion to US$18 billion in early meetings to discuss an initial public offering, the people said, asking not to be named as the deliberations are confidential. China's Zhejiang Geely and Volvo Cars had discussed a value of US$16 billion to US$30 billion, people familiar with the matter said in May.

Representatives for Zhejiang Geely and Volvo declined to comment.

A mismatch on the automaker's worth could mean Volvo Cars stays private for longer, the people said. Zhejiang Geely had sought a significant premium to the multiples commanded by other automakers, including Daimler AG and BMW AG, they said.

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The Chinese owners were planning to sell shares as early as the fall in Hong Kong and Sweden, people familiar with the plans said previously. Closely held Zhejiang Geely acquired Volvo Cars in 2010, and refreshed its lineup of vehicles to make it a popular alternative to German luxury stalwarts.

Investors have been responsive to Volvo Cars's initiatives, such as autonomous driving and electrification, helping it achieve a premium to some peers, one of the people said. Volvo Cars said it was the first global carmaker to announce plans to move exclusively to electric vehicles starting next year.

Daimler, which has dropped about 17 per cent so far this year, is trading at about 6.13 times earnings, while BMW trades at about 6 times, according to data compiled by Bloomberg. A valuation of US$12 billion for Volvo would imply the automaker is being valued at about 7.5 times 2017 operating income.

Zhejiang Geely's Swedish unit holds 99 per cent of Volvo Car AB, while a group of Swedish institutional investors holds the remaining 1 per cent through another class of shares, according to its website.

BLOOMBERG