Geely-owned Volvo Cars IPO sees lower valuations in investor feedback

The grill of the Volvo AB S 90 vehicle is seen during the 2017 New York International Auto Show (NYIAS) in New York, U.S., on Wednesday, April 12, 2017. Photographer: Mark Kauzlarich/Bloomberg

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 $12 billion to $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 $16 billion to $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.

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 is trading at a price to earnings ratio of about 6.13 while BMW trades at about 6 times, according to data compiled by Bloomberg. A valuation of $12 billion for Volvo would imply the carmaker is being valued at about 7.5 times 2017 operating income.

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

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Bloomberg

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.