Renault to cut debt after a 3 billion euro sale of shares in Volvo AB

Article by Christian Andrei, on October 9, 2010

Renault SA will soon reduce its debt due to a 3 billion euro ($4.2 billion) sale of shares in Volvo AB, which brought its shares to its highest in nine months last Thursday.

According to Volvo, the direction would be changed minimally and that Renault would still be the most influential voting shareholder. In particular, 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 explained that the proceeds are expected to reinforce Renault's balance sheet before a new strategic plan next year.

French brokerage CM-CIC Securities believes that the move will enable Renault to "seize the opportunity for a stakeholding partnership with General Motors" ahead of the IPO.

By 1027 GMT, Renault shares had increased by 7.4% at 39.2 euros. Earlier, the shares had gone up by 9.5%, the biggest one-day rise since March 2009 when global markets began to recover.

Volvo shares fell 4.3% to stand just below the 93 crown price at which Renault sold its shares. Volvo shares are higher by about 50% this year, compared to a 14% increase in the Stockholm benchmark index. [via autonews - sub. required]

Topics: renault, volvo, shares

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