Dong Sale Probed Just Months After IPO Values It at $15 Billion

Denmark’s National Audit Office has been asked to investigate Dong Energy A/S after members of the country’s parliament voiced concerns that shares in the utility were sold too cheaply to a group of investors led by Goldman Sachs two years before an initial public offering.

The investigation will look into the role of Dong’s management and the Danish Finance Ministry in setting the company’s value, as well as the incentive structures that may have motivated employees in relation to the sale, according to a statement on the parliament’s website.

The probe will delve into a case that “to a large degree has already been explored,” Finance Minister Claus Hjort Frederiksen said in an e-mailed response to questions. “I’m looking forward to the results of the office’s investigation and we at the Finance Ministry will of course assist in providing any information the office might seek.”

The request for the probe came from the Public Accounts Committee, which consists of six members who are appointed by the Danish parliament for a four-year period. The committee said it’s aware that previous studies into Dong’s sales process have already been conducted. However, the transaction was “large and complex,” and the review will focus on “shedding light on matters that have not yet been examined,” it said.

“We’ve always been ready to answer any questions that were asked in connection with Dong Energy’s capital plan and IPO,” Chief Executive Officer Henrik Poulsen said in an e-mailed response to questions. “We’re looking forward to an investigation by the Audit Office that can illuminate the facts and put an end to the myths and misunderstandings that have been brought forward in the public debate.”

Dong was valued at $15 billion in connection with its initial public offering in June this year. The company dominated media headlines in 2014, when a junior coalition member quit the previous government in protest after part of Dong was sold to Goldman Sachs.

The Wall Street firm paid about $1.5 billion in 2014 for just under a fifth of the company. A number of lawmakers questioned the price, which they argued was too low. The government at the time said the cash injection Goldman delivered came at a crucial moment and under terms others weren’t ready to accept. The Danish state has said it plans to remain Dong’s biggest owner, with just over 50 percent of the shares, followed by Goldman Sachs.

At the time, “the story the Finance Ministry told lawmakers was that Dong didn’t have enough funds to develop the company further” without the capital injection it got from a group of investors led by Goldman, said Rene Christensen, a lawmaker for the Danish People’s Party and a member of the parliament’s finance committee. “Then it turns out the company could most likely have been kept afloat without that capital injection” and “that’s where things stop making sense.”

A lawmaker for the Red Green Alliance, a member of the opposition bloc, earlier this week called for an investigation into the steps that led up to the sale and the subsequent IPO. “We need to investigate this process,” Red Green member Pernille Skipper said in a statement on Tuesday. That followed a report by local media providing fresh evidence suggesting that Dong might have been considerably more valuable than reflected by its sales price.

“The questions are: when did the process go haywire?” Christensen said. “Was there too little political control? What happened?”

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