Norway Targeting Telenor in $8 Billion Drive to Sell Assets

Norway’s government will seek to sell stakes in Telenor ASA and Kongsberg Gruppen ASA valued at a combined 47 billion kroner ($7.6 billion) as part of a plan to reduce state control of Scandinavia’s richest economy.

It will propose to cut its holdings in both companies to 34 percent, from 54 percent in phone carrier Telenor and from 50 percent in Kongsberg Gruppen, which makes weapons, the Industry Ministry said yesterday. The disposals, while not imminent, will support potential mergers, acquisitions or other “strategic changes that may create value,” the ministry said.

The government will present a paper on state assets to parliament today and won initial backing from its support parties, the Christian Democrats and Liberals, giving it a majority. The minority Conservative-led administration was elected last year on a pledge to cut taxes and reduce state ownership in companies including oil producer Statoil ASA.

“A reduced ownership stake will improve liquidity, and also reduce governmental influence in Telenor,” said Per Gunnar Nordahl, an analyst at Arctic Securities.

Telenor won’t comment on ownership matters, spokeswoman Meera Bhatia said in an e-mail. Ronny Lie, a spokesman for Kongsberg, said that the government is and will remain a “good” long-term owner.

Nordic Deals?

Telenor fell as much as 3.7 percent, the biggest intraday decline since May 15, and traded 1 percent lower at 144 kroner as of 11:17 a.m. in Oslo. That gives the 20 percent stake being put up for sale at $7.1 billion. Kongsberg Gruppen gained 0.4 percent to 141.50 kroner.

A reduced state stake could enable Telenor to combine with Denmark’s TDC A/S as the Danish market is in “desperate need of consolidation,” said Stefan Gauffin, an analyst at Nordea Equity Research in Stockholm. A deal with Sweden’s Tele2 AB, controlled by the Stenbeck family, is also an option as that market is likely to move to three from four carriers at some point, he said.

Telenor, the largest carrier in the Nordic region, has spent the past years expanding its reach. It has a 33 percent stake in Russian carrier VimpelCom Ltd. and mobile operations in 10 other countries throughout eastern Europe and Asia.

Labor Opposition

“For Telenor it isn’t so surprising given that there’s a will to support increased private ownership at the new government,” said Daniel Johansson, an analyst at Fondsfinans ASA. “In neighbouring Finland and Sweden this happened a long time ago in TeliaSonera, although it was partly driven by fiscal reasons, which of course isn’t the situation in Norway -- and that, I think, could trigger quite some opposition.”

Norway’s Labor party, the largest opposition group, is disappointed that the government plans to reduce ownership in “crucial” companies, Labor politician Else-May Botten said in an interview.

Norway owns large stakes in many listed companies and has built an $880 billion sovereign-wealth fund from its oil and gas revenue. The state also owns about 59 percent of fish company Cermaq ASA, 34 percent of DNB ASA, the country’s biggest bank, 14.3 percent of airline SAS AB and 36.2 percent of fertilizer maker Yara International ASA.

‘No Obligation’

Prime Minister Erna Solberg, who ousted a Labor-led coalition in September elections, said in August that a government led by her would seek to cut its Statoil stake to 51 percent from 67 percent. Before becoming premier, Solberg signaled her government would seek a one-third ownership stake in Telenor and aluminum producer Norsk Hydro ASA.

“Any change will depend on commercial considerations taking into account company-specific aspects as well as market conditions, among other factors,” Trade and Industry Minister Monica Maeland said. “There’s no need for changes in state ownership in these companies in the short-term and there is no obligation to divest shares.”

In the rest of Europe, governments have started paring their stakes in phone companies earlier. Germany owns about 32 percent of Deutsche Telekom AG, while the French government has a 27 percent holding in Orange SA. Sweden owns 37 percent in TeliaSonera AB.

“Longer term speculation of a potential consolidation play could materialize at some stage,” Carnegie AB analyst Espen Torgersen said in an e-mail. “But at this point in time the overhang effect should clearly be more in focus.”

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