[ET Net News Agency, 12 February 2020] Moody's Investors Service explained in a newly
published report, why a merger between Geely Automobile Holdings Limited (00175)(Geely,
Baa3 stable) and Volvo Car AB (Volvo Car, Ba1 stable) - if approved by regulators and
shareholders - would be credit positive.
"Combining Geely's business with that of Volvo would strengthen both companies' business
positions by significantly enlarging their operating scales, and bring about greater
geographical and brand diversification," said Gerwin Ho, a Moody's Vice President and
Senior Credit Officer.
Moody's said that the merger would, in particular, raise Geely's international exposure.
"The plan will also enable synergies in production costs, research and development and
capital spending," added Ho.
On 10 February, Geely and Volvo, which are 44% and 99% respectively owned by Zhejiang
Geely Holding Group Company Limited, announced a plan to combine the businesses of the two
companies. The merger would preserve the distinct identity of the two companies' brands,
namely Volvo, Geely, Lynk & Co and Polestar. According to the announcement, the combined
business is expected to be listed on the Hong Kong and Stockholm stock exchanges.
Moody's said that brand dilution or cannibalization is unlikely, because of the strong
positioning of the Volvo brand in the premium segment that competes with Mercedes, Audi
and BMW. (KL)