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Volvo Forms Strategic Alliance With Isuzu Motors, To Sell UD Trucks

Swedish auto maker Volvo Group (VOLVY.PK) Friday said it has signed binding agreements with Japan's Isuzu Motors to form a strategic alliance within commercial vehicles.

The agreements include Isuzu Motor's acquisition of Volvo Group's Japanese unit UD Trucks for an enterprise value of 243 billion Japanese yen or around 20 billion Swedish kronor on a cash and debt free basis. The deal is subject to certain conditions, including approval from regulatory authorities.

The agreement includes an earnout, in which an additional amount up to 15 billion yen or around 1.2 billion kronor is to be paid subject to the performance of UD Trucks during the years 2021-2023.

The agreements are in accordance with the Memorandum of Understanding signed in December 2019.

UD Trucks' revenues for the 12 months to June 2020 amounted to 278 billion yen or 23 billion kronor.

At the time of closing, the transaction is expected to result in a positive impact on the Volvo Group's operating income of approximately 2 billion kronor and increase Volvo Group's net cash position in the Industrial operation by approximately 20 billion kronor.

Closing is expected during the first half of 2021. The transaction is subject to certain conditions, including approval from regulatory authorities.

Volvo Group and Isuzu Motors will establish a Joint Alliance Office, with facilities both in Japan and Sweden, which will be overseen by an Alliance Board comprising the Isuzu Motors President, the Volvo Group CEO and other key executives from the two groups.

Under the alliance, the companies will form a technology partnership. Isuzu Motors and UD Trucks will jointly develop common platforms for medium heavy-duty truck models for the Japanese- and other Asian markets, utilizing Volvo Group technology.

The companies will cooperate on new technologies such as autonomous driving, connectivity and medium- and heavy-duty electrical vehicles.

Isuzu Motors and UD Trucks are discussing the conditions for supply of certain truck variants from UD Trucks to Isuzu Motors from 2022 onwards.

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