Volvo Price Tag up to $2.7 Billion

Just the Facts:

• Zhejiang Geely Holding Group said that it will spend the equivalent of $2.7 billion to acquire Volvo.
• $900 million of that is for working capital to help Volvo survive.
• Half of the money was raised by Geely and domestic bankers, with the remainder coming from investors in the United States, Europe and Hong Kong.

BEIJING — Zhejiang Geely Holding Group said yesterday that it will spend the equivalent of $2.7 billion to acquire Volvo Car. The privately owned Chinese automaker signed an agreement with Ford to buy the Swedish unit for $1.8 billion, which is the biggest ever overseas acquisition by a Chinese carmaker. But Geely said during a news briefing in Beijing yesterday that an additional $900 million will be for working capital to help turn around money-losing Volvo.

Half of the money was raised by Geely and domestic bankers, with the remainder coming from investors in the United States, Europe and Hong Kong.

Geely Chairman Li Shufu said China's cheaper sourcing and engineering costs could significantly boost Volvo's global competitiveness.

"In the future, with the support of two home markets, Volvo will be better able to deal with market ups and downs," he said.

Under the deal, Geely will own 100 percent of Volvo's cars, core technologies and intellectual property rights. It also gained rights to Volvo's safety and environmental technologies.

Despite questions on Geely's capability of handling an international brand, Li said Geely promised to keep developing Volvo in the premium-car segment, adding that its overseas plants and research teams will remain operational.

"Volvo is still small compared with Mercedes-Benz and BMW, so expanding capacity is necessary," Li said, while declining to provide details.

Geely, which won Chinese government support to buy Volvo, has reportedly secured land in suburban Beijing for a plant to produce 300,000 Volvo cars per year.

John Zeng, an auto analyst from auto consulting firm Global Insight, said Geely could improve Volvo's sales in China by securing government procurement.

The deal is expected to be completed in the third quarter of this year and is still subject to government approval.

Inside Line says: The Volvo deal begins to show its complexity. — Vivian Jin, Correspondent