China's Geely Automotive (0175.HK) said its parent company plans to bid for all of Ford Motor Co's (F.N) Volvo Car Corp, becoming the latest Chinese automaker to chase a foreign marque in a global industry shakeup.
The privately owned Chinese carmaker said on Wednesday its parent Geely Holding Group Co wants to bid for the Swedish group which media reports have valued at close to $2 billion.
Any bid would be made in conjunction with a government-backed investor, Geely Automotive CEO Gui Shengyue told Reuters. I believe if Volvo is for sale and Ford has a global announcement, then our parent will participate, Gui said.
A successful deal would boost the profile of Geely, a small, homegrown car maker and give it access to Volvo technology it needs to upgrade its cars.
Yet some analysts raised concerns about whether the Chinese car maker will be able to make the acquisition work. It's a risky move even though it may help raise Geely's profile eventually, said Ji Junfeng at Changjiang Securities.
I'm not sure how Geely can turn around a brand like Volvo, but maybe we should not underestimate the ability of privately owned car makers, he said.
Ford declined to confirm discussions with Geely. We are still continuing to hold discussions with parties that are interested in Volvo, but we are declining to name those parties, said spokesman John Gardiner.
Several major Chinese automakers have attempted overseas acquisitions in recent years with mixed results.
In 2004 for instance SAIC Motor Corp (600104.SS) bought 51 percent of Korea's Ssangyong Motor Co (003620.KS), but was later forced to write off its investment.
Such cases may have made some potential buyers wary. In June, the chairman of Denway Motors Ltd (0203.HK) said that despite having more than 4 billion yuan ($586 million) in cash on hand, the company had no plans to acquire foreign assets.
It may cost relatively little money for assets now, but it is not easy to develop them, as culture, legal environment and consumer behavior are all very different from China, said Denway Chairman Zhang Fang You.
Political barriers also loom large. China has found it tough to buy nationally important brands overseas and there have been reports of Swedish opposition to selling Volvo to the Chinese.
In June, miner Rio Tinto (RIO.AX) (RIO.L) ditched a planned $19.5 billion tie-up with state-owned Chinalco amid criticism of China buying up Australia's natural resources.
In 2005, U.S. political opposition scuppered offshore oil specialist CNOOC's (0883.HK) (CEO.N) bid for California rival Unocal, and Minmetals failed in a bid for a Canadian nickel miner.
Currently, Chinese companies are not welcome in global acquisitions, partly due to political reasons, as some people discriminate against us because China is a socialist country led by the Communist Party, said Beijing Automotive Industry Holding Corp (BAIC) Chairman Xu Heyi.
The acquisition of Volvo would, however, provide Geely with sorely needed technology, said analysts.
On the assumption that the parent successfully acquires Volvo, it will fine-tune the product line and technology until Volvo becomes profitable, and then inject the assets into the listed company, said Vivien Chan, auto analyst with Sinopac Securities Corp.
BAIC and a mainly Swedish consortium had shown interest in Volvo, media reports have said, but Geely is the first confirmed bidder.
Geely shares, which have trebled in the past year, closed up 1.9 percent at HK$2.11. The group on Tuesday posted a 145 percent jump in first-half profit.
(Additional reporting by Jacqueline Wong, Parvathy Ullatil and Samuel Shen; Editing by Ian Geoghegan and David Holmes)