Activist investor Elliott Management Corp. on Tuesday, Feb. 2, challenged Finland’s Sampo Oyj to transform itself into a pure-play insurance company by disposing of its 15.9% stake in Nordea Bank Abp and release more than €8 billion in value.
Calling Sampo a financial conglomerate because of its holdings in both insurance and banking, it described the Nordea stake as an albatross around Sampo’s neck — and a distraction that left the group trading at an unjustified discount to regional rivals such as Danish insurer Tryg AS.
Elliott gave Sampo two options: to distribute its stake in Nordea to its own shareholders via a special dividend or to sell it off, either through share placings, a direct sale to large shareholder or through open market sales.
It argued, however, that a combination of both options would be best, to give shareholders a choice of holding or selling out of Nordea, while retaining some cash from share sales for Sampo to “de-lever to prudent levels.”
In a 47-page presentation, Elliott said it had surveyed Sampo’s investors and found that more than two-thirds of those contacted wanted Sampo to exit Nordea within 12 months.
Elliott may be pushing on an open door with Sampo’s board and its chairman Björn Wahlroos (who for years also chaired Nordea, though he stepped down from the role in March 2019, according to Boardex, a sister organization of The Deal).
Sampo sold a fifth of its Nordea stake in in November and said at the time it would “explore options” to continue the process and focus on insurance.
Nordea itself has come under pressure from Swedish activist investor Cevian Capital AB.
Funds advised by Elliott Advisors (UK) Ltd., the European unit of New York-based Elliott, collectively hold investments equivalent to just over 3% of Sampo’s equity.
Elliott, however, not only urged Sampo to commit to a complete exit from Nordea but also give it a stern lecture on the insurance business as well as its communications policies. It said it should start by explaining its equity story and restoring investor confidence at a capital markets day on Feb. 24.
Elliott said that Sampo owned one of the best nonlife insurance companies in Europe, Sweden’s IF P&C Insurance Holding Ltd., which it said was underappreciated. It said the property and casualty unit had gone from a premium of four times with respect to its peers to a five times discount within five years.
The activist said Sampo should therefore better communicate IF P&C’s business to investors and analysts and set quantitative operational targets with regular updates to the markets. It said no future investments should be made outside the group’s core focus of nonlife insurance and it should not make minority investments.
Elliott also demanded that Sampo should not undertake any deal activity outside the Nordic region, until it had shown that its acquisition of British insurer Hastings Group Holdings plc (completed in November), together with Rand Merchant Investment Holdings of South Africa, was a success. Sampo, Elliott insisted, must also provide details of how it plans to track the merits of the Hastings acquisition at the capital markets day.