Goldman Drives Up Dong Valuation as Investor Predicts Bigger IPO

Goldman Sachs Group Inc.’s presence in Dong Energy A/S will boost the value of the Danish utility and make a listing more likely, a minority owner said, defending the Wall Street bank amid a wave of opposition.

Denmark’s finance committee decides tomorrow whether Goldman can invest 8 billion kroner ($1.5 billion) in exchange for an 18 percent stake in Dong, which needs fresh equity after losing money on failed natural gas bets. Finance Minister Bjarne Corydon has said Denmark must back the deal to avoid “gambling” with Dong’s future after some lawmakers questioned the bid and a former prime minister called Goldman a “shady partner.”

“We want to buy shares to defend our stake in Dong if the finance committee approves the agreement with Goldman, ATP and PFA,” Gert Vinther Joergensen, chief financial officer of Syd Energi A/S, said by phone. “The deal makes an initial public offering more likely and increases the value of our shares.”

The government pulled a planned IPO of Dong in 2008 as the financial crisis dragged down stock markets across the globe. Dong said Oct. 2 that the new buyers and the government have agreed to seek an IPO when “conditions are right.”

Syd Energi, a power company based in Esbjerg, has said it will invest 450 million kroner in connection with Goldman’s injection to maintain its current 3.5 percent stake in Dong. Goldman is making its 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.

IPO Experience

“The fact that the new management of Dong Energy has proven itself and that the investors have great experience with IPOs did influence our investment,” Joergensen said. “The shareholder agreement ties the government and Goldman together and commits them to listing Dong, and Goldman does have some capabilities in addressing capital markets that the government doesn’t.”

Goldman has said 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. The bank won’t -- “as a matter of principle” -- comment on the political situation in Denmark, Sophie Ramsay, a London-based spokeswoman at Goldman Sachs, said earlier this week.

Corydon, a member of Denmark’s Social Democrats, still has a majority in the finance committee to get the bill passed as the biggest opposition party, the Liberals, has pledged its support. The Socialist People’s Party, a junior member of the government, said yesterday it will also vote in favor of the deal after earlier signaling some doubts.

Online Petition

An online petition seeking to block Goldman’s Dong purchase has gathered more than 175,000 signatures and organizers plan rallies today in Copenhagen and Aarhus, Denmark’s second-largest city.

Dong, which is based in the city of Skaerbaek, 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.

Corydon yesterday answered questions in a parliament hearing requested by the Red-Green Alliance that lasted almost four hours. The party wants Dong’s capital injection to be funded by the government. Postponing the vote could harm Dong’s credit ratings and its ability to negotiate with its banks and investment partners, Corydon said.

“There’s been talk about whether it would be a good idea to take a time-out and postpone the process,” he said at the hearing. “But that would create uncertainty about one of our biggest companies and that could ultimately lead to loss of jobs in this country.”

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