Sweden’s most prominent activist investors, Christer Gardell and Lars Förberg, have turned their attention to non-Nordic companies, starting with Munich Re, the world’s biggest reinsurer by market cap. Gardell and Förberg’s Cevian Capital disclosed the purchase of a 3 percent stake for approximately €800 million ($1.2 billion) in early December. The move marks the beginning of a geographical expansion that the partners say could ultimately have the outfit invest as much as half of its assets, currently €3.5 billion, in non-Nordic markets north of the Alps.
“In many jurisdictions in northern Europe, where the laws are relatively clear and transparent, there has been a lack of long-term, engaged investors,” Förberg tells Institutional Investor.
The 42-year-old activist has been working from Pfäffikon, outside Zurich, since August, while Gardell, 47, has stayed in Stockholm. Förberg plans to bring a dozen analysts to Pfäffikon by the summer — roughly doubling Cevian’s head count — to scour the markets of Germany, Austria, the Benelux, France, Switzerland and the U.K. for targets. “We are still undersized for our opportunity set,” says Förberg.
Since founding Cevian six years ago, Gardell and Förberg have racked up a 45.4 percent annualized return for investors. They successfully lobbied for the sale of Skandia, Sweden’s largest insurer, in 2006 and achieved a sharp boost in dividend payments at Swedish truck maker Volvo last year.
Förberg and Gardell have already met briefly with Munich Re’s CEO, Nikolaus von Bomhard, but Förberg says the pair have not yet had time to lay out their plan for value enhancement. “We believe Munich Re can be the most profitable reinsurer in the world, and we have a very clear idea how to get there, but we will divulge our plan exclusively to management,” says Förberg. Munich Re’s net income rose 18 percent in the first nine months of 2007, to €3.29 billion, but its share price rose just 1.9 percent last year, to €132.94.
Though a company spokesman says that Cevian’s interest “confirms the attractiveness” of Munich Re, von Bomhard drew a line in the sand at a London investors conference. Amid speculation that Cevian would push for a sale of Ergo, the group’s life and property operation, von Bomhard declared it “a cornerstone” that would not be sold. But that may not be the last word given Cevian’s record and many analysts’ belief that Ergo would generate more value as part of a primary insurer.
