Wallenberg's New Walls

At noon sharp on Feb. 25, the Saab-Scania board meeting began in the conference room in Stockholm's elegant Grand Hotel. Barely an hour later, the company's chief executive was out, and Sweden's mighty Wallenberg group weighed in with the largest leveraged buyout in Swedish history: a $2.3 billion plan to acquire the blue-chip automotive and aerospace group.

In one move, 64-year-old industrialist Peter Wallenberg is dramatically reshaping his empire. For years, Sweden's protective climate enabled him to use a web of minority interests to control many top companies, from appliance maker Electrolux Corp. to telecommunications giant Ericsson. But when Sweden enters the European Community, its barriers will fall, leaving Wallenberg open to takeovers. To counter that threat, he is making Saab-Scania his centerpiece, giving him a strong base from which to compete in the new single market.

Through his holding companies, Investor and Providentia, Wallenberg already owns nearly half of Saab-Scania. With full ownership, the two holding companies will become an industrial group with assets of $12.3 billion, up from $7.3 billion now.

Wallenberg also gains access to Saab-Scania's $1 billion cash flow. The group is now eligible for the favorable tax treatment offered to Swedish manufacturers. Above all, the sheer size of the empire makes it much harder to raid.

THE WRONG HANDS. To finance the buyout, Wallenberg has launched an equally ambitious program to dump assets. In January, he sold off one of his gems, the food-engineering group Alfa-Laval for $3 billion. Another candidate targeted for possible disposal is his 15% holding in pharmaceutical maker Astra.

With access to more cash, Wallenberg can better support Saab Automobile, Saab-Scania's joint venture with General Motors Corp. The venture lost $848 million last year--a loss of $9,200 on each car sold. The other branches of Saab-Scania more than made up for the losses. Overall, the company earned $375 million on sales of $5.4 billion in 1990.

For the past year, Wallenberg says he had "clear indications that Saab-Scania shares might have landed in the hands of foreign competitors." Last summer, property developer Sven-Olof Johansson acquired a 22% interest. Wallenberg laid out $700 million to buy those shares, leaving his holding companies with $312 million in losses after the stock market collapsed last year. When he learned that outsiders were again planning to buy 10%, he decided to purchase all of Saab-Scania.

To secure the deal, he paid some 40% above the closing price of Saab-Scania's shares on the Stockholm Stock Exchange. It also cost him Georg Karnsund, 58, Saab-Scania's longtime CEO, who, associates say, took early retirement to escape the grueling pace. In his place, Wallenberg tapped Lars V. Kylberg, 51, an engineer with finance experience. With all these changes, Wallenberg aims to enter 1992 as a formidable player.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE