Renault Sells Volvo Shares for $1.92 Billion to Cut Debt
Renault SA (RNO), which is losing sales faster than any other European carmaker, sold its remaining Volvo AB (VOLVB) stake for 12.8 billion kronor ($1.92 billion) to boost funding, ending an 11-year run as the Swedish truckmaker’s largest owner.
Renault disposed of a 6.5 percent holding at 92.25 kronor per share, 3.8 percent below yesterday’s closing price of 95.90 kronor, to reduce debt and invest in France, Russia and China, the company said in a statement today. Renault sold a 14.9 percent Volvo stake in 2010.
The French carmaker, whose European sales plunged 18 percent through October, is the latest automaker to take steps to shore up it finances as the region’s market heads for its biggest drop in 19 years. PSA Peugeot Citroen (UG) is asking for 7 billion euros in loan guarantees from the French government, Ford Motor Co. (F) is closing three factories, General Motors Co. (GM) is shutting one plant and Fiat SpA (F) is eliminating 1,500 jobs.
“It’s really positive for them because they need the cash to invest in the automotive business and this clearly distinguishes them from PSA,” said Sascha Gommel, an analyst at Commerzbank AG in Frankfurt who recommends holding the shares. “This puts them in a situation to invest in new models, in new technologies, unlike PSA which is really short with regards to cash-flow.”
Renault rose 59 cents, or 1.5 percent, to 40.22 euros in Paris trading today. The stock has gained 50 percent this year, valuing the carmaker at 11.9 billion euros ($15.6 billion). Volvo (VOLVA) A shares dropped 4.15 kronor, or 4.3 percent, to 91.75 kronor in Stockholm. The stock has gained 21 percent in 2012.
“Volvo is a publicly traded company and owners buy and sell all the time, so we have no comments on this,” said Marten Wikforss, a spokesman for the Gothenburg-based company.
Net financial debt at the Boulogne-Billancourt, France- based company’s automotive division at the end of June more than doubled to 818 million euros from 299 million euros a year earlier.
About 45 percent of the sale proceeds will be invested in France, the country’s government said in a statement. Renault and partner Nissan Motor Co. (7201) yesterday signed the final agreement to take control of Lada maker OAO AvtoVAZ in Russia and invest 23 billion rubles ($742 million) in the new venture.
“These investments are required for the preparation of the group’s future in order to follow the rejuvenation program of the range, strengthen the competitiveness of its European plants and foster the international expansion of Renault,” the company said in a statement yesterday.
Goldman Sachs Group Inc. (GS) placed the shares, the U.S. bank said in a statement.
Industrivaerden AB said today it bought 10 million A shares, equivalent to 1.2 percent of voting rights and 0.5 percent of the share capital.
The Swedish holding company, which has stakes in companies including Skanska AB (SKAB), steel-maker SSAB AB (SSABA), Svenska Handelsbanken AB and Sandvik AB (SAND), now owns 6.2 percent of Volvo AB’s share capital and 18.7 percent of the voting rights, making it the manufacturer’s largest shareholder.
“It’s important for Volvo to have a strong and stable owner structure and we believe that after this sale, it will continue to have such a structure,” Carl-Olof By, Industrivaerden’s deputy chief executive officer, said in a telephone interview. “We believe in the company and see big potential and will continue to be a long-term owner.”
Renault sold a 14.9 percent stake in Volvo in 2010 for 3 billion euros. The French carmaker acquired its holding in 2001, when it sold the heavy-truck unit to the Swedish company.
Renault in October lowered its forecast for industrywide European sales to a decline of at least 8 percent, from a July estimate of a drop of 6 percent to 7 percent, and said 2012 revenue will be lower than 2011. The French carmaker kept its target of positive free cash flow this year in the auto unit.
Peugeot, Europe’s second-largest carmaker, said two days ago that it will eliminate an additional 1,500 jobs by 2014, deepening its workforce reduction to 11,200 positions. Peugeot is also selling a 75 percent stake in its Gefco trucking unit to OAO Russian Railways for 800 million euros to raise cash.
GM announced this week that it will shutter a factory in Germany, threatening 3,100 jobs. Ford intends to shut three European plants, one in Belgium and two in the U.K. Fiat closed a car plant on the Italian island of Sicily in late 2011. The Turin-based manufacturer said last week that it will cut 1,500 jobs in Poland.