New Interests for Sweden's Investor Company
By Stanley Reed
The tempo is decidedly a lot faster around Investor's Stockholm headquarters these days. The 90-year-old holding company, controlled by Wallenberg family foundations, once again has a family member as Chairman—Jacob Wallenberg. And since he arrived last July, he's been shaking things up.
Wallenberg, 50, quickly put a new management team, headed by Chief Executive Börje Ekholm, 42, in place. Now, says Wallenberg, "we are working actively with our portfolio." First order of business: Running a sharp eye over each of Investor's stable of 11 core companies and working out the best plan they can for each. Some investments may be dumped and others increased. "We will do things when we see fit," adds Wallenberg. But with hedge funds and private equity investors on the prowl in Europe they can't afford to sit back and relax.
Wallenberg's most dramatic move so far has been Investor's $5.6 billion buyout with its private equity affiliate, EQT, of kidney dialysis and medical clinic specialist Gambro in May. Investor already controlled the company but thought taking it private would be the best route to a radical remake. The company, now renamed Indap, is likely to be broken up, says a source close to the situation.
Already, Investor has hit paydirt with private equity. Because it was an early entrant into the now-trendy industry through EQT, in which it owns a 67% stake, it was able to capture capital gains of $560 million by selling previous investments last year. Along with buyouts, Investor also invests in high-tech venture capital and in China plays. After the recent heavy sell-offs, these unlisted investments now account for about 9% of its $21 billion portfolio. Insiders say that percentage is likely to rise as Investor looks for a new home for the cash raised by sales.
But that still leaves a slew of existing investments to deal with. Traditionally, the Wallenbergs have preferred to buy into companies and hold them for decades. Their key holdings are companies in which they have large or controlling stakes mostly secured by shares with special voting rights. Nearly all of them, which include Scania (SCVA.ST ), the Rolls Royce of European truck makers, Atlas-Copco (ATCOA.ST ), a heavy machinery maker, and SEB (SEB-A ), a leading Stockholm-based bank, along with telecom equipment maker Ericsson (ERIC ) and ABB (ABB ) have racked up big gains over the last 12 months.
In the first quarter, such holdings, which make up about 88% of Investor's assets, were up 14% in market value. Total returns at Investor for the 12 months through May 31 were 30%, getting Wallenberg and Ekholm, who managed Investor's U.S. venture capital activities before, off to a good start.
All the same, they are continuing to sweat Investor's portofolio. They recently prodded appliance maker Electrolux to spin off its outdoor-products division. And they pushed it to spruce up product designs to sharpen its focus and gain a competitive edge. Hoping to benefit from the changes, they are gradually upping their stake in Electrolux, now 8.3% of the market value and 26.6% of the votes.
The new team would love to emulate its predecessors and score a home run such as drugmaker Astra. Investor had owned Astra since the 1920s and in 1999 merged it with Britain's Zeneca (AZND.L ) in a $31.8 billion deal that was almost entirely profit. Now, the Wallenbergs own just 3.3%, giving rise to speculation that they will eventually sell out to raise more cash.
Chairman Wallenberg would clearly like to make a big acquisition. Investor, which has difficulty issuing new stock because of its share structure, has cut its debt to zero to give itself room to borrow if the right target pops up. "Values are high today, but there is lots of nervousness in the market place," Wallenberg says. He is hoping those jitters will send a prize scurrying into his sights.
is London bureau chief for BusinessWeek