Geely financially ready for Volvo acquisition, operation

Shanghai, March 25 (Gasgoo.com) Chinese automaker Zhejiang Geely Holding Group is set to buy Swedish car brand Volvo from Ford Motor, with a final agreement to be signed by the end of this month, and the buyer has completed its fundraising for this transaction, media reported this week.

A recent Financial Times report said that Ford may sign the deal with Geely as early as this weekend during the visit of Chinese Vice President Xi Jinping to Sweden. The report quoted anonymous sources as saying Geely will pay $1.8 billion for Volvo and pump in an additional $750 million as working capital.

The capital needed for the acquisition will come from Chinese and European investment banks, Geely's listed arm Geely Automobile Holdings Ltd., and the government of the city where the local production of Volvo will settle down. Bank of China, China Construction Bank and Export-Import Bank of China have agreed to extend loans to Geely.

In addition to nearly $2 billion it is expected to pay for the Volvo brand, Geely will need "an absolute minimum" of $1.4 billion following the acquisition of Volvo in order to continue future vehicle development, support marketing functions and fund production and distribution operation, sources said.

Beijing Geely Wanyuan International Investment Corp., a firm registered by Geely for the acquisition, has boosted its registered capital to 7.1 billion yuan ($1.04 bln). Beijing Geely Kaixuan International Investment Corp, another company set up for the same purpose, will also enlarge its registered capital to about 7 billion yuan.

Reuters reported earlier this month that Chinese financial institutions and regional government bodies had provided the money for Geely to complete its Volvo purchase by June. The money was already "in the bank account" of Geely, which would also offer guarantees to Ford about the financing of its business plan for Volvo.