Volvo Stock Jumps on Dongfeng Truck Partnership in China

Volvo AB (VOLVB) rose to an 18-month high after agreeing to buy a stake in a unit of China’s Dongfeng Motor Group Co. (489), a step that may help the Swedish company become the world’s biggest maker of heavy-duty trucks.

Volvo jumped as much as 3.4 percent to 100.5 kronor, the highest intraday price since Aug. 1, 2011, and was trading up 0.9 percent at 9:51 a.m. in Stockholm, valuing the manufacturer at 208.9 billion kronor ($32.3 billion). Volume exceeded the three-month daily average by 20 percent.

The Swedish truckmaker agreed to pay 5.6 billion yuan ($890 million) for a 45 percent stake in Dongfeng’s commercial-vehicle unit. The venture will produce and sell Dongfeng-brand trucks, buses and so-called special-purpose vehicles, Gothenburg, Sweden-based Volvo said on Jan. 26 in a statement. Volvo, which also builds Renault trucks, ranks second in the worldwide industry to Daimler AG, owner of the Mercedes-Benz, Freightliner and Fuso commercial-vehicle brands.

Volvo is expanding in China as manufacturing in the world’s second-biggest economy grows at the fastest rate in two years, according to a survey by HSBC Holdings Plc and Market Economics. Truck deliveries are forecast to rise to 3.33 million units this year after two annual declines, according to the China Association of Automobile Manufacturers.

Dongfeng Motor, China’s second-biggest automaker by vehicle sales, makes passenger cars in its home market with Japanese manufacturers Nissan Motor Co. and Honda Motor Co. as well as with Paris-based PSA Peugeot Citroen. (UG) Nissan said in a statement that it agreed to the divestment of the medium and heavy commercial vehicle business unit of its joint venture with Wuhan, Hubei province-based Dongfeng.

Dongfeng will have four seats on the seven-member board of the venture and Volvo three, the Swedish company said. Dongfeng will nominate the managing director, while Volvo will designate the chief financial officer. Completion of the deal is expected within a year, it said.

To contact the reporter on this story: Tom Lavell in Frankfurt at tlavell@bloomberg.net

To contact the editor responsible for this story: David Risser at drisser@bloomberg.net

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