Swedish truck maker Volvo has signed a deal to increase its stake in German engine manufacturer Deutz, from the current 6.7% to about 25%, by acquiring a total of 22.12 million shares from Same Deutz-Fahr Group.
Volvo will pay EUR5.88 per share to buy the stake worth EUR130m, making the company the highest shareholder in the German unit.
Volvo CEO Olof Persson said Deutz has been an important supplier and partner for many years.
"The increase in our shareholding in the company is a natural step in light of our plans to expand our commercial cooperation in medium-duty engines," Persson said.
According to Volvo, the transaction is expected to be completed by third quarter of 2012.
Earlier this year, both the companies have signed non-binding memorandum of understanding to extend long-term cooperation through joint development of the new medium-duty engines for off-road applications.
As per the MOU, the companies are also planning to begin a joint venture in China to manufacture medium-duty engines for off-road applications.
