A group of five Danish pension funds led by PFA Pension have signed a deal with the owner of mortgage giant Nykredit to buy a 16.9% stake in the lender, parties to the deal have confirmed.

The pension funds in the consortium – which will make a joint investment of DKK11.6bn (€1.56bn) – are PFA, PensionDanmark, PKA, AP Pension and MP Pension.

Nykredit, Denmark’s main mortgage lender, said yesterday it was considering stepping back from preparations to list on the Copenhagen Stock Exchange.

Today it confirmed that it had concluded a conditional sales agreement with the pension funds instead of pressing on with an IPO.

PFA said the consortium it was leading represented more than 2m individual savers – more than a third of Denmark’s population.

Under the deal, PFA will make the largest investment in Nykredit, paying DKK6.9bn for a 10.03% equity interest, while PensionDanmark and PKA will each take a 2.4% stake for DKK1.65bn.

Meanwhile, AP Pension will buy a 1.63% interest for DKK1.1bn and MP Pension will take a 0.44% stake for DKK300m.

The pension funds will buy 10.9% of shares in Nykredit, worth DKK7.5bn, from Forenet Kredit – the Nykredit customer association which owns the bulk of the company.

They have also entered into agreements with minority Nykredit shareholders Industriens Fond and Østifterne to buy part of their holdings.

Allan Polack, PFA’s group chief executive, said: “In the consortium, we are very pleased that we reached an agreement with Forenet Kredit to join Nykredit’s group of owners.

“We have had an ongoing dialogue and are happy that we have made a solution together, which represents both an attractive investment for us as well as a good solution to Nykredit’s long-term ownership and capital structure.”

PFA said the new investors had made the offer because of the company’s strong market position and the clear management strategy for continuing the development of Nykredit and its subsidiary Totalkredit.

“Hence, the consortium is confident that Nykredit will continue to realise its commercial potential going forward, which will ensure a stable and competitive return for the consortium’s pension savers,” Polack added.

Nykredit said that, as part of the deal, the pension funds have also undertaken to contribute capital in future, should such need arise.

The agreement is subject to the approval of Forenet Kredit’s committee of representatives and relevant authorities.