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GN Soars as $530 Million Settlement Turns Prey Into Predator

GN Store Nord A/S, the world’s largest maker of headsets, rose to a more than four-year high after a $530 million legal settlement generated funds to pare debt and bolster potential bids for U.S. and Asian competitors.

GN climbed as much as 15 percent to 59 kroner, the highest since Aug. 2007 and the biggest rise on Europe’s benchmark Stoxx 600 Index. The Ballerup, Denmark-based company said its DPTG I/S unit had ended a decade-long legal dispute with Telekomunikacja Polska SA, Poland’s biggest phone company, over revenues from a fiber-optic transmission system.

The funds, equivalent to about 30 percent of its market value yesterday, will be used to buy back stock and reduce debt, strenghening the company’s finances as it looks to expand its ReSound hearing aid unit, said Mikkel Danvold, GN’s head of investor relations. GN’s $3 billion sale of ReSound to Sonova Holding AG was blocked in 2007 by Germany’s cartel office.

“There is no intention or willingness of entertaining discussions about selling ReSound now,” Danvold said in a phone interview today. “If anything, it would be the other way around. Don’t look at ReSound as prey anymore, but as predator.”

GN lost a bidding war for Salt Lake City, U.S.-based Otix Global Inc. in 2010 to their bigger Danish rival, hearing aid maker William Demant Holding A/S.

‘Sensible, Logical’

“They are looking at acquisitions already in North America and Asia, but not in Europe,” said Poul Ernst Jessen, an analyst at Danske Bank A/S, who has a “buy” recommendation on GN shares. “It sounds sensible and logical, but we’ll have to wait five to ten years to see if it’s the right strategy.”

GN advanced 5.25 kroner, or 10 percent, to 56.75 kroner at 11:44 a.m. in the Danish capital. TDC, Denmark’s biggest phone company, rose 0.57 krone, or 1.2 percent, to 46.68 kroner.

GN is not looking at acquisitions for its Netcom unit, Danvold said.

“Our focus is still on growing Netcom organically, looking at unique market opportunities in unified communications, and it doesn’t necessarily need a lot of investment,” he said.

DPTG, of which GN owns 75 percent and TDC A/S 25 percent, will receive 550 million euros ($710 million), as TPSA agreed to settle two cases where the Danish companies had claimed a total of 5.5 billion kroner ($950 million) plus interest, GN said in a statement late yesterday. GN said it will now buy back shares for 1.3 billion kroner and pay off debt worth 1.2 billion kroner.

New Debt

The company said it will be able to assume new debt because it won’t change it capital structure. It will still tolerate a net debt level of two times its earnings before interest, tax depreciation and amortization.

“This is a pretty good settlement for them,” said Morten Imsgard, an analyst at Sydbank A/S. “With the debt retired, GN will be leaner and strategically free to pursue good business opportunities.”

Imsgard has an “over-weight” recommendation on GN shares.

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