Offer to the shareholders of Volvo regarding repurchase of shares

OFFER TO THE SHAREHOLDERS OF VOLVO REGARDING REPURCHASE OF SHARES The Board of Directors of AB Volvo has today decided to acquire a maximum of 10 percent of the total number of shares of Volvo, corresponding to a maximum of 44,152,088 shares, by offering the shareholders of Volvo to sell every tenth share to Volvo for a cash payment of SEK 264 per Series A share and SEK 271 per Series B share, corresponding to a premium of approximately 30 percent. If the repurchase offer is fully accepted, SEK 11,868 M will be transferred to the shareholders of Volvo. Background and reasons On April 26, 2000, the Annual General Meeting of Volvo decided to authorize the Board of Directors to decide on repurchase of Volvo's own shares in order to be able to continuously adjust Volvo's capital structure to the company's capital needs, and to be able to transfer shares in connection with fulfillment of incentive programs prevailing within Volvo or as a means of financing acquisitions. On April 25, 2000, Volvo and Renault concluded discussions on a proposed Memorandum of Understanding whereby Volvo will acquire Renault's truck business, Renault VI/Mack, in exchange for 15 percent of the shares in Volvo. The transaction will nearly double the volume of Volvo's truck business and as a result of a strengthened global presence and growth potential will create opportunities for added value for customers, employees and shareholders. The proposed transaction is conditional upon required approval from regulatory authorities, on terms acceptable to the parties, and that final agreements with Renault are concluded. Following necessary approvals, Volvo will transfer 10 percent of the A and the B shares in AB Volvo as a partial payment to Renault in exchange for 100 percent of the shares in Renault VI/Mack. If the repurchase offer is not fully accepted, Volvo intends to acquire the remaining shares in the market. Volvo will transfer the remaining payment of 5 percent of the shares in Volvo to Renault subsequent to Volvo completing any further repurchase of own shares. Terms and conditions For each share of Volvo held, one sales right of the corresponding series will be received. Ten sales rights of the same series entitle the holder thereof to sell one share of the corresponding series. SEK 264 will be paid in cash for each Series A share in Volvo and SEK 271 will be paid in cash for each Series B share in Volvo. The offered repurchase price per share corresponds to a premium of SEK 60.65 per share, regardless of series. The premium has been calculated as approx. 30 percent of the average of the last closing prices paid on the OM Stockholm Exchange for Volvo's Series A share during the period May 4 - 17, 2000. Financial effects Volvo's 1999 net income amounted to SEK 32,222 M. Assuming full acceptance in the repurchase offer, net income will decrease to pro forma SEK 31,957 M. Income per share for 1999 will increase by SEK 7.40 to pro forma SEK 80.40. Volvo's shareholders' equity amounted to SEK 97,692 M as of December 31, 1999. Assuming full acceptance in the repurchase offer, shareholders' equity will decrease to pro forma SEK 85,559 M. Shareholders' equity per share as of the same date will decrease by SEK 6 to pro forma SEK 215. The pro forma financial effects in Volvo do not take into account a consolidation of Renault VI/Mack. Note that the number of Volvo shares will remain unchanged compared with today following the transfer of the repurchased Volvo shares to Renault. Timetable Record date The record date at VPC AB for determining who is entitled to receive sales right in Volvo is May 26, 2000. The Volvo share will be traded excluding sales rights from and including May 24, 2000. Distribution of prospectus and application form A prospectus, with detailed information on the repurchase offer and application forms will be distributed to the shareholders for receipt on or about June 5, 2000. Application period for the repurchase offer Application to sell Volvo shares in the repurchase offer must be made during the period June 5 - 30, 2000. Trading in sales rights Trading in sales rights will take place on the OM Stockholm Exchange during the period June 5 - 27, 2000. Trading will also take place on NASDAQ in the US for sales rights distributed in respect of Volvo's American Depository Receipts, during the period June 5 - 30, 2000. Commission-free sale of sales rights All holders of sales rights are offered to sell up to 1,000 sales rights of each series free of commission. Application to participate in such a commission-free sale must be made between June 5 and June 19, 2000. Settlement Settlement for shares sold in the repurchase offer are expected to take place on or about July 18, 2000. Settlement for sales rights sold in the commission-free sales procedure is expected to take place on or about July 3, 2000. Other Volvo does not currently own any shares in Volvo. Volvo has not obtained any declaration from any shareholder whether the repurchase offer will be accepted or not. May 18, 2000 For further information, contact: Mats Edenborg, AB Volvo phone +46 31 59 11 26, mobile +46 708 59 11 26 The proposed tender offer has not been and will not be registered or implemented under the Securities and Exchange Law (Law No.25 of 1948, as amended). Accordingly, any statements in this pressrelease do not constitute any offer to Japanese shareholders, including beneficial shareholders ("Japanese shareholders") and any application to sell shares from Japanese shareholders shall not be accepted by AB Volvo. Japanese shareholders may receive cash for sales rights. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/05/18/20000518BIT00480/bit0001.doc http://www.bit.se/bitonline/2000/05/18/20000518BIT00480/bit0002.pdf