China reportedly OKs Geely purchase of Volvo

By Reuters
Posted July 29, 2010 at 10:38 a.m.

China’s regulator has approved Geely’s acquisition of Ford’s Volvo unit, clearing one of the last remaining hurdles to the high-profile deal, a source with knowledge of the matter said Thursday.

The deal could be completed as early as next week, said the source, who spoke on the condition of anonymity as the discussions remain private.
Shares of Geely Automobile jumped 11 percent Thursday, after Reuters and other media, citing unnamed sources, reported the company’s privately held parent, Zhejiang Geely, would close the high-profile purchase soon.

Earlier this month, the European Union approved the $1.8 billion purchase agreed to in March.

Representatives of¬† China’s Ministry of Commerce¬† reached by Reuters could not confirm if the deal had been approved. A Geely spokesman could also not be reached for comment.

The official Xinhua news agency quoted an unidentified Commerce Ministry official as saying that the deal had been approved on Monday.

The purchase of Volvo by Geely, the world’s 27th largest automaker, represents the biggest acquisition of a brand from an established automaker by a Chinese company.

The addition of Volvo will also catapult Geely into a prominent position in China’s burgeoning auto market, now the world’s largest.

Ford, which posted a $2.6 billion second-quarter profit, has said the automaker remains on track to complete the sale of Volvo in the third quarter.

Volvo is the last brand remaining from Ford’s former premier auto group. Ford previously sold the Jaguar, Land Rover and Aston Martin brands to narrow its focus. In June, Ford also announced plans to wind-down Mercury.

Geely has discussed plans for returning Volvo to profitability. A major component of that would see Geely build a new Volvo manufacturing facility in China that would nearly double the Swedish carmaker’s capacity, relying heavily on sales to the China market to achieve economies of scale.

Such a major investment would require approval from China’s state planner, the National Development and Reform Commission.

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