Volvo AB (OTCPK:VOLAF) has reached an agreement with parent company, Zhejiang Geely Holding Group, to buy their stake in the two companies' joint venture in China.
Volvo Cars is planning for IPO by the end of this year, and this will increase the company's attractiveness to potential investors.
"The clearer the ownership structure is, and the clearer the stakeholders in the company look, the easier it gets for investors to consider what it is they are investing in," said Handelsbanken Capital Markets analyst Hampus Engellau.
China's requirement for auto manufacturers to form joint companies in order to sell in the country is being lifted this year, and several other car companies are also expected to buy out their Chinese partner.
The deal will give Volvo ownership of its two Chinese manufacturing plants, Chinese sales company, and development facility.