Goldman Wins Denmark’s Assurance Dong Deal Won’t Fall ApartPeter Levring and Christian Wienberg
Denmark’s government talked down speculation that a deal struck with Goldman Sachs Group Inc. to buy a stake in Dong Energy A/S might be renegotiated after local pension funds tried to raise a counter-bid.
“The Dong deal is on and should pass the final vote in the parliament’s finance committee on Thursday,” Jesper Petersen, the top lawmaker representing the ruling Social Democrats in the committee, said yesterday in an interview.
Goldman is waiting for Danish parliamentary approval for its 8 billion-krone ($1.5 billion) investment in the utility as a growing number of lawmakers criticize the government for teaming up with the Wall Street bank. An online petition seeking to block the deal has gathered 160,000 signatures ahead of the the Jan. 30 lawmaker vote.
Goldman is trying to buy an 18 percent stake in state-controlled Dong, which needs fresh equity after losing money on failed natural gas bets. Lawmaker opposition to the purchase swelled last week after a former prime minister called Goldman a “shady partner” whose involvement in Dong would jeopardize Denmark’s environmental agenda.
Goldman says the political and popular backlash, which has dominated local media, won’t prompt the fifth-biggest U.S. bank by assets to reassess its bid.
“We have spent a lot of time and resources to make this significant commitment,” Sophie Ramsay, a London-based spokeswoman for Goldman Sachs, said in an e-mailed response to questions. “We stand by this important commitment.”
Four Danish pensions funds said Jan. 25 they are prepared to invest in Dong to get the government to drop its agreement with Goldman Sachs. Finance Minister Bjarne Corydon responded the same day saying the funds haven’t filed a “serious approach.” He criticized the group for “gambling” with Dong’s future less than a week before lawmakers are due to vote on the deal.
“This is one of Denmark’s biggest companies and it urgently needs a capital infusion to avoid slowing down and dropping an ambitious venture into offshore wind,” Corydon said in e-mailed comments yesterday. “The situation is far too serious to be used to make political statements.”
Dong is selling the shares as part of a financial restructuring announced in February last year to cut costs, reduce debt and bolster investments in oil and gas exploration, as well as in wind farms. The plan included cutting expenses by 20 percent and selling assets to raise 10 billion kroner.
Poul Nyrup Rasmussen, a former premier and a member of Prime Minister Helle Thorning-Schmidt’s Social Democrats, last week criticized the government for giving Goldman Sachs too much control over Dong.
“As a matter of principle we do not comment on the political situation in Denmark or other countries,” Ramsay at Goldman Sachs said. “ This is a long-term investment and we support the management team’s current strategy across the company’s activities, including the significant renewable energy investments.”
Goldman is making the investment via its European merchant banking unit and in partnership with Denmark’s two largest pension funds, ATP and PFA, which will own 4.9 percent and 1.8 percent, respectively. The state will retain a 57.3 percent stake and five existing minority owners will have about 18 percent, combined.
Under the deal, Goldman will be able to veto a possible sale of new shares or hybrid capital, changes in senior management or acquisitions before a possible initial public offering in 2018. No other investor gets the same veto powers as Goldman.
“We’re saying we can match Goldman as it turned out there’s a large number of Danes that want to protect an important piece of Danish infrastructure,” said Anders Bondo Christensen, head of the teacher’s union and chairman of one of the four pension bonds seeking to counter Goldman’s bid.
The government pulled a planned initial public offering of Dong in 2008 as stock markets declined. Dong said Oct. 2 that the new buyers and the government have agreed to seek an IPO when “conditions are right.”
The Bloomberg IPO Index climbed 64 percent last year, the biggest jump in 14 years, pushed by gains in Twitter Inc. and Hilton Worldwide Holdings Inc. In the U.S. companies raised about $22 billion in on IPOs in the fourth quarter, according to data compiled by Bloomberg. Sales in Europe and Asia rose too, helping global deals triple from the prior three months.
Jens Thomsen, a credit analyst at Jyske Bank A/S who recommends investors buy Dong’s bonds, said he expects the Goldman deal to go through. If it doesn’t, the government may choose to step in to give Dong the money it needs, he said.
“I’m sure that Goldman and other international banks would happily come back next time,” said Thomsen. “I don’t think Goldman would be offended if they weren’t let in. Goldman has been kicked over the shins before and they move on quickly, that’s the nature of the game”