Volvo Said to Explore Sale of North American Rental Business
Stock Chart for Volvo AB (VOLVB)
Volvo AB (VOLVB), the world’s second-largest truckmaker, is exploring the sale of its North American construction-equipment rental business, according to two people familiar with the process.
The division, known as Volvo Rents, may be worth $1 billion to $1.5 billion, said one of the people, who asked not to be identified because the plans are private. No final decision to sell has been made, the person said. Kina Wileke, a spokeswoman at Volvo, declined to comment.
The business has attracted interest from private-equity firms as well as companies, said the person. Volvo Rents operates more than 130 rental stores in North America and offers equipment for construction, commercial and industrial markets, according to its website.
The Swedish company is exploring a sale of the rental unit as it shifts its focus to profitability from sales growth. In 2011, Volvo said it aims for operating margins at the top of the heavy-equipment industry. The company is also exiting peripheral businesses, and in July agreed to sell its aircraft-engine unit Volvo Aero to GKN Plc (GKN) for 633 million pounds ($954 million).
“The strategy that we’ve seen over the past year is that Volvo is trying to exit unprofitable segments or areas,” said Christer Magnergard, an analyst at DNB ASA (DNB) in Oslo. “This is a part of their plan to raise profitability by 300 basis points by the end of 2015.”
Volvo shares recovered from some of their earlier losses after the report and were trading down 2.3 percent at 96.3 kronor at 12:08 p.m. in Stockholm. The shares have climbed 8.4 percent this year, valuing the Gothenburg, Sweden-based truckmaker at 205 billion kronor ($30.7 billion).
Volvo said in January that a 5.6 billion-yuan ($910 million) plan to buy a 45 percent stake in the truck unit of Chinese manufacturer Dongfeng Motor Group Co. will help it overtake Daimler in worldwide commercial-vehicle sales.
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