Consortium of investors acquires core stake in Hagar

Arion Bank has sold a 34% stake in Hagar plus a call option on an additional 10% to a diverse group of pension funds and professional investors. The acquisition price is ISK 4.1 billion. It is intended to list the company on the stock exchange later this year.

Búvellir slhf, a company owned by several pension funds and other professional investors, has acquired 34% of shares in Hagar, or 35.3% of the company’s outstanding shares. The company has also negotiated a call option on a further 10% of outstanding shares at a higher price. The seller is Eignabjarg, a subsidiary of Arion Bank. Following this transaction it owns 64.1% of the outstanding shares in Hagar. The acquisition is subject to the approval of the Icelandic Competition Authority.

The acquisition price is ISK 4,140 million. The company has net interest-bearing debts of ISK 12.5 billion according to the balance sheet of 30 November 2010 and the company’s enterprise value is therefore approximately ISK 24 billion. The acquisition price corresponds to ISK 10 a share and the price in the call option is 10% higher.

The largest owners of Búvellir are Hagamelur ehf. (a company owned by Hallbjörn Karlsson, Árni Hauksson, Sigurbjörn Þorkelsson and the insurance company TM), Gildi lífeyrissjóður, SÍA I (an institutional investor fund managed by Stefnir, whose owners include many of Iceland‘s largest pension funds) and the institutional investor fund Stefnir ÍS-5. Other owners of Búvellir include the pension funds Festa lífeyrissjóður, Lífeyrissjóður bænda, Lífeyrissjóður starfsmanna Búnaðarbanka Íslands, the investment fund Stefnir Samval and the private pension funds Vista and Lífeyrisauki, Miranda ehf. (owned by Berglind Jónsdóttir) and the investment company Draupnir (which is owned by Jón Diðrik Jónsson). No single shareholding exceeds 8.5% in Hagar. The acquisition is fully equity financed.

This agreement is an important stage in the process of selling Arion Bank's stake in Hagar. In October the Bank announced its plans to sell a core holding in Hagar in an open sales process, stating that it would consider all offers made for its holding in the company. The Bank received satisfactory offers for both the core stake and the entire company, and eventually the Bank entered into negotiations with Búvellir which made the best offer.The next stage of the sales process is to prepare Hagar for a stock market listing; an application is expected to be made later this year. Prior to the listing Arion Bank will offer shares in Hagar to professional investors and general investors. The sales process is being managed by Arion Bank - Corporate Advisory.

Höskuldur H. Ólafsson:
“Hagar is Iceland’s largest retailer and plays a vital role on the retail market throughout the country. It is essential for the Icelandic business sector that the ownership structure of Hagar is normalised. The Bank has achieved its objective of selling a core holding in the company and the next step is to list the company on the stock exchange. Floating Hagar could represent an important stage in rebuilding the Icelandic equities market. The Bank has been satisfied with the way Hagar has performed recently despite the difficult economic environment, and the company is on a sound financial footing. The management has been doing an excellent job and now has on board a group of shareholders with vast experience of the Icelandic retail market.”

Hallbjörn Karlsson, co-owner of Búvellir:
“Búvellir’s investment in Hagar is a long-term project and we are keen to see the company focus on its core business. We want a diverse shareholder base, both through the pension funds and the direct involvement of individual shareholders.”