Volvo to sell North American machine rental business to Platinum Equity for $1.1 bn
11 December 2013
Swedish auto major AB Volvo yesterday agreed to sell its North American machine rental business Volvo Rents to US private equity firm Platinum Equity for about 7.2 billion Swedish crowns ($1.1 billion) on a cash and debt-free basis, as part of its strategic effort to focus on the core business.
At closing, net financial debt in the Volvo Group's industrial operation is expected to be reduced by the same amount.
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. A pre-requisite for completion of the transaction is that Platinum Equity is successful in a debt offering to be made to finance its acquisition. Volvo CE will continue to sell products to Volvo Rents under the new ownership.
Formed in 2001, Volvo Rents offers rental of a comprehensive range of machines for the construction and engineering industry, including Volvo CE products.
Through over 130 rental stores in North America, it offers equipment for the construction, commercial and industrial markets, as well as an extensive line of Volvo compact excavators, compactors, wheel loaders, backhoe loaders, compaction equipment, and skid steer loaders.
In the first nine months of 2013, Volvo Rents had net sales of 3.1 billion Swedish crowns and recorded an operating loss of 47 million Swedish crowns.
Volvo, the world's second-largest truck maker, said that all of Volvo Rents' employees will remain with the company and Volvo CE will continue to sell products to Volvo Rents under the new ownership.
''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,'' said Olof Persson, Volvo Group president and CEO.
The sale is also part of the Gothenburg, Sweden-based company's plan to focus on its core business and reduce debt by 10 percentage points.
The deal is expected to be closed in the first quarter of 2014 and is at that time expected to have a positive impact on the cash flow for the Volvo Group of $1.1 billion.