Posted on Sep 21, 2010 by Sergio Ulloa
A deal has been announced involving Danish and Swedish insurance and pension firms agreeing a DKK 5 billion (US$879 million:670 million Euros) takeover of Danish Investment Bank FIH Erhvervsbank (FIH); the deal relieves FIH of liabilities incurred by its previous takeover of failed Icelandic bank Kaupthing.
The Scandinavia consortium consists of Danish based pension company ATP, PFA Pension, CPDyvig and Swedish insurer Folksam forming a partnership to takeover FIH for an initial cash payment of DKK 1.9 billion (US$333 million:255 million Euros). The cash payment is topped up with an earn-out payment of DKK 3.1 billion (US$542 million:415 million Euros), which will take into account any losses which occur between the 30 of June 2010 and 31 December 2014 - offset by potential gains from other trading activities . Additional financial adjustments will be factored in for previous commitments currently held by FIH.
The deal was made with the Central Bank of Iceland (Sedlabanki) which holds 99.89% of the shares after previous Icelandic owners Kaupthing bank - currently in a moratorium status - granted Sedlabanki the equity for a loan in October 2008. Sedlabanki agreed to the consortium's approach to acquire their 99.89% stake in the Danish based investment bank FIH Erhvervsbank.
Mar Gudmundsson, Governor of Sedlabanki, said of the deal, 'We see this transaction as a good outcome for the parties involved given the circumstances. When the transaction will be completed Sedlabanki will receive a substantial amount of foreign currency, and will also get a possibility over the medium term to recover the rest of the loan granted in 2008."
The joint venture is comprised of ATP - which will hold the largest shareholding at 49.95% - with PFA Pension and Folksam each owning 19.98%. CP Dyving will own a minority share of 9%, with the remaining 0.11% of the new company being held by FIH and employees. The acquisition will provide FIH with the offer of a loan facility from ATP of DKK 10 billion ($US$1.7 billion:1.3 billion Euros).
The FIH headquarters are currently based in Copenhagen. As of June 2010 the investment bank held assets amounting to DKK 125 billion (US$4.3 billion:3.3 billion Euros) and shareholder equity of DKK 8 billion US$1.4:1.07 billion Euros); it is currently the sixth largest bank in Denmark, providing corporate banking, corporate finance and risk management services.
ATP CIO Bjarne Graven Larsen said 'It is the Consortium's intention for FIH to prosper as the best corporate and investment bank in Denmark. We have a strong belief in FIH's unique position and expertise coupled with the demand for the financial services that the bank offers its clients. FIH is well positioned to capitalise on this and we expect an attractive return on our investment."
The Icelandic bank, Kaupthing, bought FIH in 2004 for DKK 7.1 billion (US$1.2 billion:953 million Euros); Kaupthing failed in 2008 under the huge debt obligation it accumulated with fellow Icelandic banks at the onset of the global collapse in the banking system. In 2009, FIH recorded a pre-tax loss of DKK 148 million (US$26 million:33.8 Euros), but, along with the general turn-round in banking finances, is forecast to generate an estimated a profit of DKK 600 million (US$105 million:80 million Euros) in 2010.
Final completion of the takeover is subject to regulatory approval by the Danish Financial Supervisory Authority.
So far as the partners in the joint venture are concerned, ATP (Arbejdsmarkedets Tillægspension) is the largest Danish statutory pension plan, with 4.6 members providing income security through a broad range of investment categories. Danish PFA Pension is an established pension and life insurance company, with approximately 600,000 policyholders and 10,000 corporate customers. The Swedish based Folksam Group consists two companies providing a life and general insurance network, including activity based and health insurance. C.P. Dyvig is an independent financial advisory firm operating in Denmark.
ATP (Arbejdsmarkedets Tillægspension)
ATP was is a statutory pension plan covering 4.6 million members. Together with the tax-financed state pension, ATP provides basic income security in old age for the Danish population. ATP was established as an independent entity in 1964 and has since developed to become the largest pension fund in Denmark. ATP invests in a wide variety of assets. Investment categories: Equities, Interest, Credit, Inflation and Commodities.
PFA is the leading Danish pension and life insurance company within corporate pension plans with approximately 600,000 policyholders and 10.000 corporate customers. PFA is owned by its customers, which means that the value creation is first and foremost used for high returns on pension plans and significantly increasing reserves. PFA was established in 1917 as an independent life insurance company focusing on the Danish corporate market for pension plans and life insurance,
Group was founded in 1908 and has approximately 4 million customers. The Folksam Group consists of two insurance companies in which Folksam ömsesidig livförsäkring (Folksam Life) and Folksam ömsesidig sakförsäkring (Folksam General) are parent companies. Folksam provides occupational pensions, private pension savings schemes, endowment insurance, group life insurance, and other risk insurance products. The company is based in Stockholm and mainly focus on the Swedish market.
FIH Erhvervsbank (FIH)
FIH Erhvervsbank was founded in 1958 and is headquartered in Copenhagen, Denmark. FIH provides various banking and financial products and services to corporate and individual customers, property investors, and institutional investors primarily in Denmark.