The Estonian pensions sector is set for major consolidation following the acquisition by LHV Varahaldus, LHV Group’s asset management subsidiary, of a 100% stake in Danske Capital, the Danish banking group’s Estonian asset management operation.
The share purchase agreement was signed on 29 January, followed by LHV Varahaldus’s increasing its share capital, and finalised on 2 May.
The preliminary price has been set at €11m.
Danske Bank stated on its website that the sale was part of its Baltic strategy to focus on corporate banking.
Following the takeover, LHV intends to merge the two asset managers’ pensions operations, which would shrink the number of Estonian pensions players to four.
As of the end of March, according to the Estonian pensions portal Pensionikeskus, LHV Varahaldus’s mandatory second-pillar fund operation was the country’s second-largest pension fund manager in asset terms after Swedbank, with net assets of €576.5m (21.4% of the total) and an active membership of 131,302 (20.4%), while third-pillar assets totalled €7.7m (6.1%).
In addition to the pension funds, LHV Varahaldus manages a UCITS fund and provides investment management services for a Luxembourg-established UCITS.
Danske’s second-pillar membership totalled 39,140, and its second-pillar assets €240.6m, while the third pillar had assets of €5.2m.
The plan is to merge the pension funds by investment strategy.
LHV manages five mandatory second-pillar funds and one voluntary third-pillar plan; Danske Capital manages three and two, respectively.
Danske’s second-pillar offerings comprise a conservative, balanced and progressive fund apiece, while LHV runs two conservative funds, and one apiece with balanced, progressive and aggressive strategies.
Julia Garanža, marketing and communications manager at LHV Varahaldus, told IPE the mergers would commence with the second-pillar funds, shrinking the overall number to five, with the decision on the voluntary funds taken at a later date.
“As an outcome of the merger, the fund management fees for the clients of the two biggest Danske mandatory funds will fall by nearly 20% and, for the clients of the LHV pension funds, nearly 10% more than it otherwise would fall,” she said.
The asset management company merger will become effective following authorisation from the Estonian Financial Supervision Authority, with consolidation expected to start in the third quarter.
The deal has already been cleared by the Competition Authority, Estonia’s anti-monopoly body.