China trip to pave the way for new deals

Prime Minister Stefan Löfven is to begin a three-day trip to China next week, including a meeting with Chinese Prime Minister Li Keqiang, accompanied by Enterprise Minister Mikael Damberg, Trade Minister Ann Linde and Environment Minister Karolina Skog, along with a business delegation that includes Ericsson, ABB, Astra Zeneca, Scania and Volvo Cars and Volvo Group.

Sweden’s exports to China amounted to SKr 46 billion in 2016. During the first quarter this year exports grew by 33%, compared to the same period last year.

Mikael Damberg says that China’s efforts to move forward on the global political arena in terms of trade and climate makes it easier to find a shared agenda.

Telia receiving preferential treatment

In 2014 the Swedish government decided to open the 700 MHz band for mobile broadband, but in 2016 cancelled the auction of the frequency, which is suitable for mobile broadband services in rural areas, pending an investigation into whether the emergency services could use part of band. The government has now decided that the Post and Telecom Agency (PTS) may continue with the auction, starting 1 November. The problem now is that PTS is impairing competition on the Swedish market, writes Johan Johansson, chief executive of 3 in DI on Saturday.

Sweden has four mobile operators providing strong competition on the market, but under new PTS guidelines this will be impaired. Not only will rights cost more, which will make it harder for smaller operators to take part in the bidding process, but in reality just two actors will be able to buy the rights to the entire 700 MHz band, which will probably be used for 5G. The government is thereby giving Telia preferential treatment allowing it to offer 5G services on unequal terms, claims Johansson.

Speculation over Hexagon

Hexagon yesterday commented the news that it is in early-stage talk with rivals on a potential sale (see SPR 14/6 Early Ed.), saying that it had “noted the recent speculation in media regarding a potential acquisition of the company. Hexagon regularly evaluates various opportunities to optimise the company’s positioning and shareholder value. Should these evaluations lead to concrete results, the market will be immediately informed”.

One analyst tells DI that this is nothing less than an invitation to other parties. “They’re talking to someone and want other interested parties to be aware of this.”

According to the Financial Times, Hexagon has been working with Goldman Sachs and HSBC to gauge interest from rivals such as ABB, Schneider Electric, Siemens and GE.

Daniel Djurberg, Handelsbanken analyst, believes Hexagon’s IES would suit ABB Robotics, but leans towards an American conglomerate such as Honeywell, while SEB’s Daniel Schmidt believes GE and Siemens are likely candidates.

Time for reflection

Sterling suffered a steep fall on Friday after the shock election result in the UK, wallowing at 1.2735 against the dollar and 0.8783 against the euro.

The weakness of the pound is negative for Swedish export firms as well as for those in the UK importing components to their end products, comments Ulla Nilsson, head of the Swedish Chamber of Commerce in London.

Kitchen company Nobia, which is exposed to the UK market and saw its share price fall by 2.6% on Friday, is already feeling the effects, while construction firm Skanska says it is not greatly affected since it has its revenues and expenses in the same currency.

Claes Jacobsson, head of Scania UK, argues that the outcome of the election will allow time for reflection. “A hard Brexit is not what companies and industry want; it creates too much uncertainty,” he says.

Finance Minister Magdalena Andersson is cautiously optimistic, saying, “If the outcome is that the British want a close relationship to us after they have left the EU then that is good.”

Government backs down over banking fee

The government is backing down on the proposal to raise the resolution reserve fund fee. This is the second time in a short period that the government reverses on taxation of banks. In February, it withdrew a proposal for a new bank tax, replacing it instead with this rise in the resolution fee.

The purpose of the resolution fee is to create a buffer for any future financial crises. In its final form, presented yesterday, the original changes were either gone or had been toned down significantly.

Nordea has discussed plans to move its head office to Copenhagen or Helsinki because of the fee. However, the bank had no comment to make on Thursday.

Finance Minister Magdalena Andersson had previously commented that there are benefits for taxpayers if Nordea leaves the country. However yesterday her tone was milder, “Nordea is of course welcome to stay in Sweden and we see a significant point with having a head office in Sweden.”

Representatives of the alliance were pleased with the government’s U-turn.

Trump policy hitting Swedish export companies

After almost five months in the White House, Donald Trump’s trade policy is still unclear. This uncertainty is affecting Swedish export companies.

“The only concrete things we have seen is that he wants to renegotiate the North American free trade agreement Nafta, and that he has withdrawn the USA from TPP, the deal with Asia. We do not know more than this,” says Anna Stellinger, director general for the National Board of Trade. She continues, “Uncertainty is never positive. Not for trade and not for companies that want to invest.”

Anna Stellinger points out how important a market the USA is for Swedish companies. The board has calculated that 139,000 Swedish jobs are linked to Swedish exports to the USA.

Successful deal for Sandvik

FAM, which manages the Wallenberg Foundations, is purchasing Sandvik’s golden nugget Process Systems (SPS) for five billion kronor after a tough bidding war. The sales price exceeded even Sandvik’s expectations.

SPS had a turnover of 1.7 billion kronor in 2016, and DI reports it has an operating margin of around 20%.

SPS is the first larger acquisition that FAM owns 100%. “We feel mature enough to work with a wholly owned subsidiary,” says Lars Wedenborn, FAM’s CEO.

Gardell paves way for power shift

The news that Cevian Capital has bought more than 5% of the capital in Ericsson is just further proof that Investor and Industrivärden have failed to control the telecom giant, suggests Dagens Industri. Well-run companies with an efficient structure and a competent board of directors do not receive visits from activists. No activist would dream of buying a share of Atlas Copco, or any other company in the Douglas sphere, continues the business daily.

It is quite feasible that Christer Gardell’s Cevian Capital will call for the elimination of different voting rights, which would raise the value of the company. If Christer Gardell chooses to pursue the matter, it is reasonable to assume that he will receive the backing of Industrivärden and institutional owners, thereby paving the way for a shift of power.

Volvo gearing up for stock market

The preparations for listing Volvo Cars on the stock market have taken new, clear steps forward. Dagens Industri reports that CEO Håkan Samuelsson held an important meeting on Monday with major investors on the Stockholm stock market. “The meeting was a launch pad for important investors prior to a stock market listing later this year,” says a source with good insight.

During the meeting, Håkan Samuelsson highlighted the development of Volvo Cars’ new models and the company’s strategic goals.

The determining factor is whether Volvo Cars’ owner Li Shufu gives the go-ahead. According to DI’s sources there is an increasing likelihood that he will do so as there remains great interest from Swedish investors.

Nordea has decided to move

 

The issue of whether Nordea will move its head office to either Helsinki or Copenhagen has been a hot topic since the government presented its proposal to raise the resolution reserve fee. In March Nordea chair Björn Wahlroos said the higher fee could cost Nordea an extra SKr 5 billion, motivating a move.

Svenska Dagbladet reported on Saturday that sources have now confirmed that the decision has been made and all that remains is a formal decision by the bank’s board on 30 May. However Nordea’s head of investment Rodney Alfvén would neither confirm nor deny the reports.

Dagens Industri, DI, reports today that Finance Minister Magdalena Andersson denies that the Swedish state would lose any tax income if Nordea moves its head office. Nordea pays corporate tax in Sweden for its Swedish operations regardless of where its head office is situated.