UPDATE 1-Cevian ups stake in Volvo, says confident in efficiency drive

Mon Dec 2, 2013 6:03am EST

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STOCKHOLM Dec 2 (Reuters) - Activist fund Cevian Capital said on Monday it had raised its stake in Volvo to 10.5 percent of votes and voiced confidence in the ability of world's second biggest truck maker to make good on a drive to boost profitability.

Cevian's investment vehicle, Violet Partners, held 6.7 percent of votes in the truck maker as of the end of September, according to Volvo's website, making them the second biggest owner after Industrivarden which holds 20 percent.

The activist fund has owned a stake in Volvo since 2006 when it swept in demanding changes of the company's structure, among them the sale of the group's aerospace unit which has since been sold to Britain's GKN.

"We think the valuation of Volvo is low and that the shares have been out of favour and fallen back due to that," said Christer Gardell, who founded Cevian in 2002 with Lars Forberg and shares with him the title of managing partner.

"We were also able to increase our voting power without it costing very much," he told Reuters over the phone.

Shares in Volvo, hit by concerns that the company's sweeping efficiency scheme may fail to produce the planned results in the wake of weaker than expected earnings in the third quarter, have fallen 10.3 percent over the past three months.

The decline has meant the stock has significantly underperformed rivals with Scania down 1.6 percent, Germany's MAN SE up 3.3 percent and market leader Daimler 15.6 percent higher in the same period.

"We have great confidence in (Volvo Chairman) Carl-Henric Svanberg and that he will be able to safely execute the improvement programme that has been announced," Gardell said.

Volvo, which besides trucks also makes buses, construction equipment and engines, launched its efficiency drive last year with a target of boosting its operating margin by 3-5 percentage points by the end of 2015.

After the acquisition of 25 million A-shares, Cevian said it now owned 68.7 million A-shares and 29.8 million B-shares, corresponding to 4.6 percent of the share capital in Volvo. Volvo A-shares pack 10 times the voting power of B-shares. (Reporting by Niklas Pollard and Johannes Hellstrom)

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