Volvo AB, the world’s second largest truck maker, agreed to sell its unprofitable North American construction-equipment rental business to Platinum Equity for 7.2 billion kronor ($1.1 billion) to focus on manufacturing.
Volvo, vying for market leadership with Germany’s Daimler, is in the midst of a sweeping restructuring scheme to boost profitability across the group, which it expects will boost operating earnings by 9 billion crowns in 2015.
The disposal of the Volvo Rents unit will result in a 1.5 billion-krona cost this quarter and is targeted for completion in the first three months of next year, the Gothenburg, Sweden-based company said today in a statement.
“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 Chief Executive Olof Persson said in a statement.
“The sale value looks good for a loss-making business,” said David Arnold, a London-based industry specialist at Barclays Plc’s investment-banking unit, said in an e-mail. “The cash inflow should allow the company to maintain the dividend, albeit in a low-quality fashion.”
The deal was expected to be closed in the first quarter of 2014 though a pre-requisite was that California-based Platinum Equity successfully completed a debt offering to finance its acquisition, Volvo said.
Volvo Rents has about 2,100 employees, all of whom would remain with the unit when sold, and offers rental of machines used in the construction and engineering industry across the United States, Canada and Puerto Rico.
Via Bloomberg, Reuters