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As rumored earlier this year, the Volvo Group has agreed to sell its Volvo Rents construction equipment rental business to Platinum Equity, a U.S.-based private equity firm, for $1.1 billion (SEK 7.5 billion).
The sale should be completed during the first quarter of 2014. As a pre-requisite for the sale to go through, Platinum Equity must successfully make a debt offering to finance the acquisition.
Volvo Rents operates 130 stores in North America and employs about 2,100 people. Volvo says those employees will not be affected by the sale. The rental business was formed in 2001 and offers a wide range of heavy equipment and Volvo Construction Equipment will continue to sell products to Volvo Rents under the new ownership.
According to the announcement, Platinum Equity is based in California and “has significant experience investing in companies that serve the construction, commercial and industrial equipment rental market.”
“We looked at different alternatives to grow Volvo Rents’ business and concluded that the best alternative is to sell the operation to another owner,” said Olof Persson, Volvo Group president and CEO, in a prepared statement. “Volvo Rents’ business does not have a sufficiently strong connection with the Group’s core operation to motivate continued ownership.”
Volvo Group expects the sale to negatively impact its fourth quarter operating income by $230 million (SEK 1.5 billion). However, the sale of the business is expected to decrease the company’s financial debt for Industrial Operation by its $1.1 billion price.