The long period of uncertainty over the ownership of Pohjola seems to be over as Finnish financial group, Sampo-Leonia, sells its shares in Pohjola to mutual insurers Ilmarinen and Suomi. According to the letter of intent signed on May 16th Sampo-Leonia will receive EUR 67 per share, or EUR 745 million, in addition to getting benefits of an additional EUR 25/share dividend announced at the first extraordinary shareholders’ meeting on May 12th. This transaction will make the group around Ilmarinen the majority shareholder of Pohjola with 53 per cent of the shares in the company. However, transaction is a subject to the approval of the Insurance Supervision Authority.
Sampo-Leonia bought the Pohjola Shares from Swedish Skandia on October 13th 1999 for 60 euros per share with the purpose of joining Pohjola to Sampo-Leonia. The seller group will obtain EUR 607 million directly and EUR 810 million including the avoir fiscal tax credit as dividends and sales profit for the ownership period of eight months.
Later on Tuesday the continuation meeting of the extraordinary shareholders’ meeting of Pohjola decided not to accept the transfer of the non-life insurance operations of the company and its group to If P&C Insurance. The Board of Directors was obligated to discontinue the implementation of the "If…" project and the related transfer of insurance portfolio. This was proposed by Ilmarinen as the group around Sampo urged the fellow shareholders not to leave the "If…" The pull-out will mean that the whole future of the "If…" non-life alliance is thrown into doubt. The decision was not so unexpected as Pohjola has shown considerable scepticism about the alliance for some time.
At the shareholders’ meeting the Ilmarinen Chief Executive Kari Puro told the shareholders that one of the reasons to pull out was because the former Pohjola Board did not have the authority to transfer the non-life insurance operations of the company to "If…" alliance. Puro also argued that Swedish majority owner of "If…" and a long time companion of Pohjola, Skandia, broke the "loyalty obligation" when selling Pohjola shares to Pohjola’s strongest competitor Sampo-Leonia. The sale made the long-term co-operation between Pohjola and Skandia impossible, said Puro.
According to Pohjola Chairman of the Board, Heikki Hakala, a withdrawal from "If…" could mean a costly legal battle with partners Skandia and Storebrand, which have threatened penalties totalling billions of Swedish crows should Pohjola leave the group. In a joint statement on May 17th Hans Henrik Klouman and Jan-Mikael Bexhed, the General Counsels of Storebrand and Skandia respectively, said "In the arbitration proceedings, Storebrand and Skandia will, among other things, demand of payment of very substantial damages."
On the other hand, Pohjola would be able to demand compensation from Skandia for breaking a 12-year-old contract, which obligates Skandia not to sell its shares in Pohjola, said Hakala.
For further information, please contact Pekka Lehtinen.
This article contains general information on the subject matter and shall not be relied upon for a specific case. Specialist advice should be sought with respect to any specific circumstances.
