Swedish truck maker Volvo on Tuesday said it has agreed to sell its machine rental business in North America to U.S. private equity firm Platinum Equity for about 7.2 billion Swedish kronor ($1.1 billion).
The deal is part of Volvo’s restructuring plan to focus on its core business and boost profitability and earnings across the group, as it competes for the No. 1 spot with Germany's Daimler.
The Goteborg-based world No. 2 truck maker said in a statement that the deal, when complete, would reduce the net financial debt in the Volvo Group’s industrial operation by the same amount, adding that “the transaction is expected have a negative impact on the Group’s operating income of approximately SEK 1.5 billion in the fourth quarter of 2013.”
The transaction is expected to be closed in the first quarter of 2014, and the deal's completion will depend on a pre-requisite that California-based Platinum Equity is successful in a debt offering to finance its acquisition. Volvo will continue to sell products to Volvo Rents under the new ownership, the company added.
Volvo Rents, which was formed in 2001 and offers rental of machines used in the construction and engineering industry across the U.S., Canada and Puerto Rico, has about 2,100 employees, all of whom will remain with the unit when sold, Volvo said.
“We looked at different alternatives to grow Volvo Rents’ business and concluded that the best alternative is to sell the operation to another owner. Volvo Rents’ business does not have a sufficiently strong connection with the Group’s core operation to motivate continued ownership,” Olof Persson, Volvo group oresident and CEO, said in the statement.