Cross-Ownership Web Unravels After Swedish Jet Scandal

  • Svenska Handelsbanken sells voting stake in Industrivaerden
  • Lundberg cements his position, buys Industrivaerden shares

In Sweden, one of the biggest banks has taken the final step in unraveling a web of cross ownership that has dominated a large part of corporate life in the country for decades.

Svenska Handelsbanken AB sold its holding of vote-rich shares in investment company Industrivaerden AB, the Stockholm-based lender said on Thursday. The network of cross-shareholdings that the move affects had been rivaled only by the structures dominated by Sweden’s Wallenberg family.

Handelsbanken’s sale represents 6.8 percent of the share capital and 10.3 percent of the voting rights in Industrivaerden. The stake went to Swedish and international institutional investors for 153.25 kronor a share. The move follows the divestment of Handelsbanken’s 2.1 percent stake in tissue-maker Svenska Cellulosa AB and SCA’s sale of its 2.8 percent holding in Industrivaerden late last year.

The development marks the end of one of Sweden’s most powerful corporate constellations. Through its stake in Industrivaerden, Handelsbanken exerted power and influence over large swathes of corporate Sweden, including companies such as Volvo AB, Skanska AB, Ericsson AB and SCA. Industrivaerden still retains its stakes in those companies, but without Handelsbanken.

“This is definitely corporate history,” Carina Lundberg Markow, head of responsible ownership at Swedish insurance company Folksam, said in an e-mail. “The map of corporate Sweden is being redrawn.”

The unraveling of the cross-ownership structure follows local media reports of corporate-jet misuse by top-level executives, leading to a number of firings, including the chief executive officers at Industrivaerden and SCA. The reports referred to directors taking advantage of corporate resources to indulge in excesses, including lavish entertainment for clients as well as trips for family members and even pets. Several executives have been questioned by Swedish prosecutors on suspicion of bribery following the reports. 

Lundberg Markow said the controversies only sped up a development that was inevitable and which probably had been planned over a long period of time.

“The former setup benefited shareholders for many years,” she said. “When the cross-ownership structure was constructed there were clear motives for that. However, the world has changed, and neither the companies, spheres or individual players are the same.”

SCA said on Wednesday it will be divided into two companies, splitting its hygiene and forestry units. The separation, suggested for years by investors, and repeatedly dismissed by former chief executive Jan Johansson (who was ousted following the corporate-jet scandal) is further evidence of the sweeping changes brought on by the reshuffle.

The demise of what in Sweden was known as the Handelsbanken “sphere” also paves the way for Industrivaerden chairman Fredrik Lundberg to further cement his position as one of the country’s most powerful executives. His investment company LE Lundbergfoeretagen is the largest shareholder in Industrivaerden. It raised its stake following Handelsbanken’s sale. Lundbergfoeretagen bought 9 million of the shares offered by the bank, and now holds 16 percent of Industrivaerden shares, and 23 percent of the voting rights.

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