Buyout Firms Losing Out to Spinoffs as Nordic Valuations Soar

  • Nasdaq head of listings says trend adding to Nordic record
  • Sweden’s biggest firms set to do spinoffs in next two years

With investors piling into stock markets again, Nordic companies interested in selling off parts of their business seem to be finding a separate stock-market listing more appealing than turning to private equity funds.

"We’ve seen a continuous trend, appetite, for spinoffs while the market has been strong,” Adam Kostyal, head of European listings at Nasdaq, said by phone. “This has been driven by a number of aspects, but mainly because the market provides such a good valuation for these companies. Spinoffs have, from a historical perspective, given shareholders a better value.”

Kostyal says the preference now for splitting units off by distributing them to shareholders through a separate listing is “undeniably driven by valuation,” with Stockholm’s all-share index up about 15 percent over the past 12 months. He’s also “pretty sure” that many of the companies now listing divisions were approached by private-equity firms, but found spinoffs more attractive.

Unlike last year, when most of the companies doing spinoffs were small or mid-sized, 2017 and 2018 will be characterized by separate listings by some of Sweden’s biggest companies, according to stock exchange announcements to date. At least five Swedish corporations have already said they’re considering separate listings for units, including benchmark companies such as Atlas Copco AB, Lundin Petroleum AB and Svenska Cellulosa AB.

Read more about plans by Sweden’s biggest companies to spin off units here, here, here and here.

"What has made spinoffs more relevant than ever is maybe the prominent names of the companies that said they intend to make one," Kostyal said. "Such prestigious names will raise more attention than smaller spinoffs.”

For investors, the development spells greater transparency, Kostyal said. It also increases the pool of stocks in different industries, helping investors diversify.

The trend adds to a record in Nordic stock listings, with the amount of capital raised in IPOs and new listings on Nasdaq’s Nordic exchanges hitting 7.8 billion euros ($8.2 billion) last year, up from 5.94 billion euros in 2015. That put the Nordic region ahead of the rest of Europe, beating both London and Euronext NV’s markets.

Interest in IPOs this year will in part be driven by international companies looking to Stockholm as a way to avoid uncertainty related to Brexit. Nasdaq Stockholm is currently having a “reasonable dialog” with some 20 to 30 international companies that have shown interest in listing on Sweden’s main market and the First North alternative exchange, Kostyal said.

In 2017, "we have every chance of becoming the most active stock market again, in terms of the number of entries," Kostyal said.

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