Renault, which is losing sales faster than any other European carmaker, sold its remaining 6.5 per cent Volvo stake for 12.8 billion kronor (€1.4 billion) to boost funding, ending an 11-year run as the Swedish truckmaker's largest owner.
Renault sold 138.6 million Volvo A shares at 92.25 kronor per share, 3.8 per cent below yesterday's closing price of 95.90 kronor, to reduce debt and invest in France, Russia and China, the company said in a statement today.
Renault sold a 14.9 per cent Volvo stake in 2010.
"What the market now wants to know is whether Renault is going to burn cash or not," said Philippe Houchois, an analyst at UBS in London.
"The positive way to interpret this transaction is to say that they're going to use it to deleverage; the negative one is to say that they'll burn it."
The French carmaker, whose European sales plunged 18 per cent through October, is the latest automaker to take steps to shore up it finances as the region's market heads for its biggest drop in 19 years.
PSA Peugeot Citroen is asking for €7 billion in loan guarantees from the French government, Ford is closing three factories, General Motors is shutting one plant and Fiat is eliminating 1,500 jobs.
Renault advanced as much as €1.52, or 3.8 per cent, to €41.15 and was up €1.50 as of 9.11am in Paris trading.
The stock has gained 53 per cent this year, valuing the carmaker at €12.1 billion. Volvo A shares dropped as much as 3.6 per cent and were down 3.4 per cent at 92.65 kronor in Stockholm.
The stock has climbed 22 per cent this year.
"Volvo is a publicly traded company and owners buy and sell all the time, so we have no comments on this," said Marten Wikforss, a spokesman for the Gothenburg-based company.
Net financial debt at the French company's automotive division at the end of June more than doubled to €818 million from €299 million a year earlier.
Renault and partner Nissan yesterday signed the final agreement to take control of Lada maker OAO AvtoVAZ in Russia and invest 23 billion rubles (€566 million) in the new venture.
"These investments are required for the preparation of the group's future in order to follow the rejuvenation program of the range, strengthen the competitiveness of its European plants and foster the international expansion of Renault," the company said in a statement yesterday.
Goldman Sachs Group placed the shares, the US bank said in a statement.
Bloomberg