Swedish pension funds AMF and Folksam announced they are re-investing a total of SEK5bn (€478m) in new preference shares issued by the now Chinese-owned Swedish carmaker Volvo, in a show of continued commitment to the country’s industrial stalwart.
The pension funds decided to retain the 1% stake in Volvo Cars that their preference shareholding conferred upon them, after Volvo Car repurchased the shares it had originally sold in 2016, and issued a new set for the same nominal amount.
AMF took up SEK3bn of the preference shares in the refinancing, and Folksam Group bought SEK2bn – of which it said it was distributing SEK1bn to Folksam Liv, SEK200m to Folksam Sak and SEK800m to its public-sector pension fund subsidiary KPA Pension.
As with the 2016 preference share issue, the securities are convertible into ordinary shares in the case of Volvo Cars undertaking an initial public offering (IPO) – an event which was thought to be imminent three years ago, but whose plans were subsequently put on hold.
Michael Kjeller, Folksam’s head of asset management and sustainability, said: “The investment gives our customers a good risk-adjusted return and a continued commitment to a successful company with a strong connection to Swedish industry.”
While national pension buffer fund AP1 took part in the 2016 preference share issue to the tune of SEK1.5bn, it was forced to sell the holding in an even split between AMF and Folksam last year, because internal regulations prevented it from owning unlisted shares for an extended period.
Anders Oscarsson, AMF head of equity, said in an announcement from the pension fund he expected the re-investment to provide a stable return: “Volvo Cars is a well-managed and profitable company, with a robust research and growth strategy.”
A spokesman for AMF told IPE it was no secret the fund would welcome an IPO, and Oscarsson told Swedish business daily Dagens Industri (DI) that a new listing would be good for the Stockholm stock exchange, as well for AMF’s customers, with a new large liquid industrial share to trade in.
DI reported that the trade war had been one factor prompting Volvo Cars to delay its planned listing on the Swedish stock exchange.
While the convertibility of the new shares has been confirmed, the carmaker told IPE they came with a different set of terms and conditions, which were more flexible and beneficial to both parties, but declined to give any more details about these terms.
According to DI, Volvo Cars bought back its preference shares because it would have had to raise dividend payments on them by 200% from December this year – to SEK750 per share from SEK250. Volvo repurchased the old shares at 112.5% their nominal value, according to the article.
“[The] announcement represents a significant, continued endorsement for Volvo Cars from one of Sweden’s largest pension funds and one of the country’s leading insurance and pension savings group, who together manage assets worth SEK1,100bn,” said Volvo in its announcement of the deal.
Lenner & Partners served as financial adviser to both pension funds for the transaction.