Volvo to invest $900m in joint venture with Chinese truck maker Dongfeng

Swedish truck maker AB Volvo (STO:VOLV-B) said it would pay CNY5.6bn (USD900m/EUR669m) for 45% in a new venture with Chinese peer Dongfeng Motor Group Company Ltd (HKG:0489), or DFG, in a move that would convert Volvo into the largest global heavy-duty trucks maker.

The venture called Dongfeng Commercial Vehicles (DFCV) will comprise most of DFG’s medium- and heavy-duty commercial vehicles operations, the buyer said. The deal, part of a strategic alliance between the two groups, will enhance Volvo and DFG’s positions, while ensuring great opportunities for both of them.

Volvo will contribute technological expertise and global presence, providing a significant potential to DFCV to expand and make profits outside China.
In turn, the Swedish group will become co-owner of China’s largest heavy-duty and medium-duty truck manufacturer, securing economies scales in terms of sourcing, development and production for its truck business, it said.

Completion is anticipated to take place in 12 months, pending clearance from Chinese regulators, among other conditions.

On a pro-forma basis, DFCV had net revenues of some CNY39bn and an operating profit of around CNY1.2bn, from the sale of about 142,000 heavy-duty trucks and 49,000 medium-duty trucks in 2011. It has some 28,000 employees.

Italian insurer Generali takes control of eastern European venture in £2.5bn deal

Italian insurance major Generali SpA (BIT:G) on Tuesday announced a EUR2.52bn (USD3.3bn) deal that would see it take full control of its eastern European joint venture GPH and put an end to its partnership with PPF Group in the region.

Under the terms of the agreement, Generali will buy an initial 25% in GPH by 28 March 2013 for EUR1.29bn and take the remaining 24% at the end of 2014 for EUR1.23bn, it said. Meanwhile, the JV will sell its insurance operations in Russia, Ukraine, Belarus and Kazakhstan, in consumer finance insurance for EUR80m to PPF Group.

Commenting on the transaction, the Italian group’s CEO Mario Greco said it clarifies its strategy for central and eastern Europe, converting it into a top player in this high-growth region. With this move, Generali can fully benefit from its investment and focus on boosting its core insurance operations, while increasing competitiveness and profitability, Greco added.

As soon as the first stage of the transaction closes, Generali will have full management control of GPH, while PPF will have the right to appoint two of the JV’s eight board members. The buyer said it would use proceeds from a bond issue to cover the price for the initial stake.

Goldman Sachs International advised Generali in this transaction, which remains subject to clearance by the relevant authorities.

Reuters cited sources earlier as saying that Generali’s board was to consider the purchase of the stake not yet owned in the JV with PPF.

GPH is active in 14 countries in central and eastern Europe, with gross premiums of EUR4bn at the end of 2011, up from some EUR1bn in 2007. During this period, its client portfolio increased to 14m from four million. The region is Generali’s fourth market after Italy, France and Germany, it said.

Canada’s CBM discusses Indonesian JV with Exxon Mobil

Canadian gas company CBM Asia Development Corp (CVE:TCF) is holding talks with US oil major Exxon Mobil Corporation (NYSE:XOM) over the formation of a joint venture partnership for the development of coalbed methane (CBM) projects in Indonesia.

The announcement from CBM Asia made no mention of financial terms. The final conditions of the planned farm-in deal are subject to the parties negotiating and signing formal agreements and obtaining government approvals, CBM Asia said.

The talks revolve around CBM production sharing contracts (PSCs) in the Barito and Kutai Basins. The companies are to split ownership in the PSCs equally.

The portion of the deal concerning the Barito Basin in South Kalimantan envisions CBM Asia buying between 35% to 37.5% in three existing PSCs. Additionally, the Canadian group will hold rights to purchase a 35% interest in one additional PSC that ExxonMobil may invest in. The prospective partners intend to launch some pilot well test programmes, with CBM Asia covering certain operating costs.

With regard to the Kutai Basin, the plan is for CBM Asia to obtain the right to farm into 50% of the future participating interest Exxon Mobil may purchase in certain CBM PSCs. Once Exxon Mobil acquires an interest in one or more PSCs in the Kutai Basin and the necessary conditions have been met, government clearance included, the US company will transfer half of its interest to CBM Asia.

UPDATE: Anglo American to meet competition conditions on JV with Lafarge

London-based miner Anglo American Plc (LON:AAL) welcomed on Tuesday the ruling of UK’s competition regulator on its planned joint venture with French cement producer Lafarge (EPA:LG) and expressed confidence that they would be able to meet the conditions attached to the approval.

The Competition Commission (CC) unveiled earlier today its final report on the investigation into the British JV planned by Anglo and Lafarge, asking the two partners to sell a substantial operations portfolio in order to win its approval.

In response, Anglo said it would work closely with the regulators towards a positive outcome and the conclusion of the JV deal as soon as possible.

Lafarge also reacted by saying that despite the required disposals, the proposed business combination would generate recurring synergies through enhanced operational efficiencies, improved logistics and value-added products.

The 50/50 venture, agreed last year, would merge Anglo American’s Tarmac UK with Lafarge’s construction materials operations in the UK into a business with combined sales of GBP1.8bn (USD2.9bn/EUR2.2bn) and EBITDA of GBP210m in 2010, the two companies have said.

The regulator, which expressed concerns in February that the JV would hurt competition in certain segments of the building materials market, said today it was still standing by that ruling. Before the JV deal can move ahead, Anglo and Lafarge have to sell operations including cement plants, rail depots, RMX plants and aggregate quarries, in order to protect consumers interest in key segments, especially since a lot of construction work is publicly funded, the CC said.

See also: UK Competition authorities demand disposals to OK Anglo American, Lafarge JV