Paris: Renault is to cut debt after a 3 billion euro ($4.2 billion) sale of shares in world number two truckmaker Volvo, which sent the French carmaker’s shares to a nine-month high on Thursday.
Volvo said there would be little change in direction because Renault would remain the most influential voting shareholder. Renault sold B-class shares, which have less voting power.
Renault chief executive Carlos Ghosn said the share placing “confirms investor confidence in the future development of Volvo Group, which we share, as Renault will remain a major shareholder with 17.5% of voting rights”.
He said proceeds would strengthen Renault’s balance sheet ahead of a new strategic plan next year.
French brokerage CM-CIC Securities said the move could allow Renault to “seize the opportunity for a stakeholding partnership with General Motors” ahead of the US carmaker’s IPO.
Renault shares were up 7.4% at at €39.2 by 3:57am. They had earlier risen 9.5%, the biggest one-day rise since March 2009 when global markets started to rebound. Volvo shares slipped 4.3% to stand just below the 93 crown price at which Renault sold its shares.
Volvo shares are up about 50% this year, against a 14% rise in the Stockholm benchmark index. The company has been powered by strong recovery in its markets.
The sale of shares will sharply reduce Renault’s debt as it invests in electric cars and emerging markets.
The stake sold represents 14.9% of Volvo shares and 3.8% of voting rights. It left Renault with 6.8% of Volvo’s share capital and 17.5% of voting rights. The A shares have 10 times the vote of B shares.
Renault said the proceeds from the private placement to institutional investors would help bring net debt below 3 billion euros from 4.6 billion, in line with targets.
Renault had said its stake in Volvo was “not strategic”, but Ghosn said last week it was “a very good asset” and Renault would remain for “a very long time”.
Analysts said the move shifted attention away from financing towards rosier factors including improved prospects at Japan’s third-largest automaker Nissan, where Renault holds 44%. Together, Renault and Nissan are the world’s No.4 carmaker.
Ghosn, chief executive of Renault and Nissan, also told Le Monde newspaper last month that Renault and Nissan are interested in closer ties with GM, adding: “If they are interested, they will come to us.”
Renault is now the second-biggest owner of overall capital in Volvo behind Swedish investment group Industrivarden, but the biggest holder of voting rights.
Volvo Chief Executive Leif Johansson saw little impact from the sale on the truckmaker’s long-term direction.
“Renault used to have about ... 20% of voting rights, now they have 17% voting rights. I don’t think there will be change,” he told Reuters at a truckmakers’ event in Brussels.
Asked if Renault would keep its remaining stake, he said: “We believe so, for now. That’s the information I have.”
Industrivarden chief executive Anders Nyren said his group had not bought any of the shares and agreed with Johansson on Renault’s intentions. “Renault has now made its move, that is now done. There will be nothing more,” he said.
But Cevian Managing Partner Christer Gardell, whose Violet Partners vehicle is the third-biggest owner of Volvo voting stock, was less certain.
“I think one will have to go back and consider that this (Renault’s Volvo stock) is part of their financial resources, and if needed there will be a step two as well,” he said.
Analysts said the sale could end speculation about a big wedge of Volvo shares hitting the market.