The parent of Volvo Trucks North America, AB Volvo, and the parent of Mack Trucks, Renault have agreed to merge truck operations and create the world’s second-largest truck maker.
The Swedish-based Volvo announced Tuesday that it will pay about $1.5 billion, or about 15% of its shares to acquire the truck division of the French-based Renault SA, including RVI of Europe and the U.S.-based Mack Trucks.
The announcement comes seven years after talks about a full scale merger between the two companies ended after the plan was voted down by Volvo shareholders.
Under the agreement, Renault will buy another 5% of Volvo in the open market, taking its holding to 20% and allowing it to keep its hand in the truck business without diverting key managerial resources to a non-core activity.
The announcement will give the Volvo-Renault alliance about a 28% share of the heavy truck market in Western Europe and around a 24% share of the North American truck market.
Many analysts believe the combination of the two truck operations is unlikely to hit European Union or U.S. regulatory obstacles as the companies complement each other geographically.