Volvo to sell rental unit to private equity for $1.1 billion
STOCKHOLM (Reuters) - World number two truck maker Volvo (VOLVb.ST) said on Tuesday it had agreed to sell its machine rental business in North America to U.S. private equity firm Platinum Equity for about 7.2 billion Swedish crowns ($1.1 billion).
Volvo, vying for market leadership with Germany's Daimler (DAIGn.DE), 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 company, which makes construction equipment, buses and engines as well as trucks, said the sale was part of its strategy to focus on core business and that the deal would cut the group's net debt by the same amount as the purchase price.
However, the sales of the business, Volvo Rents, was seen denting Volvo's operating income by about 1.5 billion crowns in the fourth quarter of 2013, it added.
"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 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, Volvo said.