Biggest IPO in Denmark's History Tempts $80 Billion PFA Fund

  • Denmark starts selection process to invite banks for IPO
  • Government won't say whether Goldman can help arrange sale

Denmark’s largest commercial pension fund is considering raising its stake in Dong Energy when the utility is put up for sale in what looks set to become the biggest initial public offering in Danish history.

PFA Pension A/S, which partnered with Goldman Sachs and ATP to buy about one-quarter of Dong last year, says adding to its stake would fit with its investment goals.

“We’ll be positively inclined to buy more shares in Dong, but we’re not able to make any conclusions just yet,” Anders Damgaard, chief financial officer at PFA in Copenhagen, said by phone. “It’s a type of share that we already hold a lot of, so it will fit right in.”

Denmark said on Tuesday it has started a “competitive selection process” to choose banks to guide it through an IPO due to be completed by March 2017 at the latest. Finance Minister Claus Hjort Frederiksen has said he wants the sale, which may value Dong as high as $11 billion, to go through as soon as possible. The government intends to maintain a majority stake.

PFA paid 800 million kroner ($115 million) for a 1.8 percent stake in 2014, when the Danish government invited investors to help shore up the utility’s balance sheet. Goldman’s New Energy Investment S.á.r.l. unit bought an 18 percent stake while state-managed pension fund ATP acquired 4.9 percent.

The yield on Dong’s 2022 bond has come down since its capital injection
The yield on Dong’s 2022 bond has come down since its capital injection

The deal became the center of a political dispute that resulted in a junior coalition party quitting Denmark’s previous government in protest. A number of lawmakers questioned the price Goldman paid, which they argued was too low. The government at the time said the cash injection the Wall Street bank delivered came at a crucial moment and under terms others weren’t ready to accept. Goldman has repeatedly said it considers itself a long-term investor in Dong.

The Finance Ministry declined to comment on whether Goldman is also in the race to be one of the arrangers for the IPO. For PFA, Goldman’s presence in that capacity wouldn’t be an issue.

“We wouldn’t have any problem with Goldman joining as an IPO bank,” Damgaard said. “We have full confidence in the ability of the people sitting at the Finance Ministry to choose an appropriate model and governance structure.”

But for some lawmakers, the idea of having Goldman help arrange the IPO is less palatable, given the bank’s existing stake in Dong.

It would create a “very peculiar situation,” Jonas Dahl, the finance speaker for the Socialist People’s Party, said in a phone interview. “We can’t have anyone looking out for special interests listing Dong.”

But it wouldn’t be the first time Goldman was involved in an IPO on a company in which it already holds a stake. In March 2014, Goldman was among a group of owners selling shares in ISS A/S. Back then, the investment bank also acted as joint global coordinator in what at the time was Denmark’s biggest IPO in 20 years.

Damgaard said that when Dong is listed, PFA will pitch its performance against its other Danish equities and utility holdings.

Dong CFO Marianne Wiinholt said last week the company will pick the lead banks tasked with managing the share sale before the end of 2015. A review of its oil and gas unit will be concluded by mid-2016 before the IPO.

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