Ford Motors yesterday said that it had signrd a deal to divest its Volvo brand, for which it has been scouting for a buyer, to one of China's largest independent carmakers, Zhejiang Geely Holding Company.
The acquisition by Geely is likely to be the biggest overseas acquisition by a Chinese automaker, although it lacks experience in running international brands.
The deal was signed yesterday at Gothenburg in Sweden by Li Shufu, chairman of Geely, and Lewis Booth, chief financial officer of Ford and both carmakers expect the transaction to be completed in the third quarter of this year after regulators approve of the transaction.
Under the deal, Geely will pay $1.8 billion to Ford for acquiring Volvo Cars and related assets including intellectual property, which will be paid in the form of a $200-million note and the remainder in cash.
The cash portion of the purchase price will be adjusted at close for customary purchase price adjustments relating to pension deficits, debt, cash and working capital, the net effect of which could be a significant decrease in the cash proceeds to Ford.
Although many analysts had doubted whether Geely could muster the finances to fund the acquisition, Geely said yesterday that it has secured all necessary financing to complete the transaction as well as secured significant working capital facilities to fund Volvo Cars' ongoing business.