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Nordics Ride Private-Equity Investment Boom Set to Rival Pre-Crisis Record

Private-equity investment in the Nordic countries is poised to match a pre-crisis record as the region’s funds look for opportunities to offload cash that’s been largely idle for the past two years.

Equity funds based in Sweden, Norway, Denmark and Finland invested 2.85 billion euros ($3.2 billion) in the region in the first half, representing an increase of 150 percent from a year earlier, Norwegian asset manager Argentum Fondsinvesteringer AS said in a report yesterday. That surge, which compares with a 50 percent increase in Europe, puts the region on track to match 2007’s record 7 billion euros, it said.

“A lot of the Nordic funds, especially the Norwegian ones, were successful in raising capital right before the financial crisis and are probably looking for opportunities to put that money to work,” said Maria Borch Helsengreen, head of business development at Argentum, which has about $1 billion under management. “There’s no indication that investments in the second-half of the year should be any lower than the first half.”

Sweden, Norway, Denmark and Finland boast some of Europe’s smallest budget deficits and lowest debt levels, allowing governments to avoid austerity packages that are impeding a recovery across the rest of the region. That’s helped fuel Nordic corporate growth and contributed to a 12 percent jump in the Stoxx Nordic Index of the region’s top 30 traded companies as investors buy into profits. That compares with a 0.9 percent fall in the Dow Jones Industrial Average and a 2.7 percent decline in the FTSE 100 Index.

‘Sitting on the Fence’

“Most funds have been sitting on the fence for the past two years and invested very little,” Kine Buroey Ianssen, a partner at Cubera Private Equity AS, which has 1.5 billion kroner ($243 million) under management, said on the phone. “Now they’re able to pursue investments because pricing has improved and they’re dependent on investing their capital relatively quickly -- they’re not supposed to sit on their money for too long.”

Nordic private-equity funds, which invest in assets that aren’t publicly traded and often generate their financing through loans, raised at least 1.2 billion euros in the first six months, according to Argentum.

Norway’s share of the Nordic risk capital market rose to 30 percent in 2010 from 8 percent in 2006, Helsengreen said. The increase was led by growth in venture capital investment in industries such as energy and biotechnology, she said. The Norwegian Venture Capital & Private Equity Association has seen its membership rise more than seven-fold since 2001.

Increased Dramatically

“Private equity investments have been gaining more in Norway than in the other Nordic countries for a few years now and that is due to the fact that we came from very low levels,” said Paal A. Dahlberg, chief operating officer of HitecVision AS, which has $1.4 billion under management, in a phone interview. “Assets under management have increased dramatically.”

Private-equity investment into Norwegian companies rose to 7 billion kroner in the first half, from 5.6 billion in all of 2009, Argentum said. Funds purchased 13 businesses, including Procuritas Capital Investors’ acquisition of the King Oscar AS sardines brand for an estimated 230-245 million kroner, compared with eight takeovers in 2009.

Private equity “is an alternative to stock listing and to be listed is a less and less suitable form of ownership for more and more companies,” said Gert W. Munthe, head of Oslo-based Herkules Capital AS, which has 12.25 billion kroner in committed capital. The company acquired ODLO Sports Group AG, Elis AS, New Store Europe AS and Intelecom Group AS this year.

Estimates Beaten

Second-quarter earnings for six of the 10 biggest companies on the Oslo stock exchange beat analyst estimates. In Sweden, 20 of the 25 biggest companies on the OMXS30 Index had beaten estimates by Aug. 9.

Norwegian funds have raised more than 3.3 billion kroner this year, with Stavanger-based HitecVision AS closing its Asset Solutions fund at $420 million in June and Northzone Ventures announcing the first close of its Northzone VI fund with 90 million euros in February.

“Should the stock markets start to stabilize, Argentum expects that private equity-backed IPOs will be prominent in the region in 2010,” the asset manager said in its report. “Several companies within the food and healthcare sectors are ready to IPO and these sectors have been delivering above average returns after listing.”

IPOs

The Nordic region had three public offerings last quarter, the biggest being PAI Partners’ 16.42 billion kroner listing of Danish food producer Chr. Hansen A/S, followed by Altor Equity Partners AB’s IPO of Swedish BYGGmax AB and CapMan’s listing of MQ Retail AB in Sweden.

Argentum is an asset manager specializing in Nordic private equity. It was established in 2002 and is funded by the Norwegian government. It has invested in 46 funds in the region.

Norway’s sovereign wealth fund, the world’s second largest, lost 155 billion kroner last quarter as the European debt crisis caused stocks to slump and BP Plc tumbled after the Gulf of Mexico spill, the investors said today in Oslo.

To contact the reporter responsible for this story: Marianne Stigset at mstigset@bloomberg.net

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