Danica Pension, the Danish corporate pension provider, has bought a minority stake in marine logistics company Unifeeder for DKK400m (€54m) from private equity firm Nordic Capital, previously the sole shareholder.
Unifeeder, now the largest independent pan-European feeder company, operates short-haul freight transport services into smaller ports worldwide, which super tankers are too big to enter.
According to Jacob Aarup-Andersen, Danica’s CFO, the company is an attractive investment because it is asset-light – i.e. it leases vessels on a short-term basis rather than owning them.
Aarup-Andersen said: “This gives it flexibility in managing capacity continuously, resulting in low volatility in terms of financial performance compared with companies that use highly leveraged debt structures to buy their ships.
“Unifeeder is also a well-managed company that has consistently delivered strong results, and has significant long-term growth potential.”
He told IPE Danica expected to make “close to double-digit returns” from Unifeeder.
He said: “The overall strategy is to replace some of our bond investments with this type of investment.”
In 2013, the average return in Danica Balance, the pension provider’s main product, was 7.8%, while Danica’s return on listed equities was 16%.
The Unifeeder stake is Danica’s first major direct investment in a company and heralds the start of direct investing as a new investment strategy.
Over the next two years, the pension fund is expecting to make direct investments totalling “double-digit billions of krone”.
DKK10bn would equate to around 3% of the pension fund’s DKK330bn-worth investment portfolio.
The change in strategy has been driven by Aarup-Andersen, who arrived two months ago.
Aarup-Andersen was previously chief portfolio manager at Danske Capital, the asset management arm of Danske Bank, which is also Danica’s parent.
He told IPE: “We want to refocus the investment process and strategy, and move towards alternatives.
“Yields from government bonds and mortgages are very low, while equities are now fully valued because of cheap money.
“We can find that extra yield in private markets where we are not up against hundreds of players.”
He said Danica’s edge in chasing these deals was its size, its flexibility in the terms it can agree, and also the speed of execution of deals.
Danica has not previously owned direct investments because of the skill sets needed to manage them.
It is now hiring specialists to build an in-house team.
However, it will not be a hands-on investor.
Aarup-Andersen told IPE the investment case for future acquisitions would be driven by each specific investee company, and that there were no targets in sector terms.
The key parameters would be that a company is well-run with strong financial management, capital generation and low risk resulting from the capital structure in place.
He added that direct investments might be made not just through equity but also through debt such as mezzanine finance.