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Investors can find opportunity on the Helsinki Stock Exchange


The last two years have seen a large group of Finnish companies bought out of the Helsinki Stock Exchange and delisted.

That group is lead by Amer Sports Oyj, which owns sporting brands such as Wilson, Salomon, Suunto, Arc’teryc, Peak Performance and Louisville Slugger. The business was bought by Chinese company ANTA Sports at a 38% premium. The sale closed valuing the company at €4.6 billion.

Chinese Interest

However, this is not the largest buyout of a Finnish owned firm. In 2013, Finnish gaming company SUPERCELL was considering listing itself, but decided to sell 53% of the shares to Japan’s Softbank for €1.1 billion, which then in 2016 sold its total stake to Chinese-owned Tencent for €6.5 billion.

Tencent now owns 84% of the company and SUPERCELL’s value is now estimated to be over €10 billion.

These two excellent companies ended up in Chinese hands. Chinese businesses love brands and especially established brands.

Finnish stocks to interest Chinese buyers

In 2020, these Finnish companies have highly successful brands in the small (€100million+)/midcap (€1 billion+ but less than 10 billion) range:

Nokian Renkaat
TYRES (FI0009005318)
Market Cap €3,6 billion,

FSKRS (FI0009000400)
Market Cap €970 million,

MMO1V ((FI0009007660)
Market Cap €307 million

Rapala VMC
RAP1V (FI0009007355).

If I were a Chinese company in 2020, these businesses would be on my list of potential acquisitions.

De-listed Finnish stocks purchased by international groups

The Norwegians have been busy too. They rarely sell their own companies, but they buy other Nordic companies when they can.

The Norwegian government even introduced a new investment-screening regime in 2019, allowing the Norwegian authorities to investigate and block Foreign Direct Investment (DRI) on grounds of national security, national financial stability and autonomy. The decision applies to EU and non-EU investments alike.

In 2019 Finland lost another telecommunications operator to foreign ownership when Telenor bought DNA telecommunications. Telenor first acquired a 54% majority ownership at €1.5 billion and then acquired the rest, making the value of total purchase over €3 billion.

Previously Sweden’s Telia and Finland’s Sonera had merged in 2002 and in 2017 Sonera changed it’s name to Telia in Finland.

This leaves Finland with only one Finnish owned telecommunications operator, Elisa Oyj, in a country where Nokia ruled the world in mobile phones in the 1990’s until Apple released its iPhone in 2007.

Nokia Oyj does not make mobile phones anymore. The mobile phones business was sold to Microsoft in September 2013 for €5.6 billion. An excellent deal for Nokia but a very bad deal for Microsoft. It was a very sad end to the Finnish mobile phones story.

The fifth largest buyout was Finnish real estate company Sponda, which was bought by American mammoth investor Blackstone in the summer of 2017 for €1.76 billion.

Also in 2019, Paroc, an insulations company, was sold to US buyers. Technopolis, owner of office space in the UK and consulting company Pöyry were sold to Swedish ownership. All these companies subsequently delisted.

Helsinki exchange losing its Blue Chips

In 2018 – 2019, the NASDAQOMX Helsinki exchange lost eleven companies, which is very high number and I personally think this trend continues to be higher that the average 3-4 companies per year. During the last five years the Helsinki stock exchange has lost 21 companies and has gained 54 new ones.

The problem is that the new listings are small and medium cap companies and the companies bought out are larger cap.

The NASDAQOMX Group stock exchange platform connects four of the five Nordic stock exchanges. Oslo is the odd one out. Remember, Norwegians do not want to sell their own stocks, they just want to buy others.

Nordic exchanges seeking economies of scale

OMX AB is originally a Swedish company, which was established in 2003 combining the Stockholm exchange and the Helsinki exchange. OMX AB holds 100% stakes in the Stockholm, Helsinki, Copenhagen, Iceland, Lithuanian, Latvian and Estonian exchanges.

In 2008 OMX AB became part of the Nasdaq and it is now NASDAQ OMX Group.

During the deal the Dubai exchange bought 20% of Nasdaq and acquired 28% of the London Stock Exchange (LSE).

Nasdaq OMX Group used to own 10% of the Oslo exchange, but the Norwegians sold their exchange to Euronext in the summer of 2019, which now operates the London, Paris, Amsterdam, Brussels, Dublin, Lisbon and Oslo bourses.

Euronext merged with New York Stock Exchange (NYSE) in 2007 forming NYSE Euronext (NYX). However, during the crazy exchange ownership deals, Intercontinental Exchange (ICE) bought NYSE Euronext in 2012. In June 2014 Euronext was split from ICE with an initial public offering (IPO).

Confused? You are not the only one.

The reason for this merger mania was the fact that commissions from trading were rapidly falling so economies of scale were highly sought after. The European Commission denied the 2012 Deutsche Börsche merger with NYSE Euronext – on the grounds that the new company would have resulted in a quasi-monopoly in the area of European financial derivatives traded globally on exchanges.

Deutsche Börsche could not get this decision overturned.

What does this mean for Nordic stocks?

The future of the Helsinki Exchange is not in bad shape according to CEO Henrik Husman. He believes we still have a vibrant stock exchange, but the newly listed stocks will be primarily small and medium size companies.

This is ok, but the delisted companies are the larger companies with established brands and businesses. The main problem that I see is that the large Finnish institutional investors are not really interested in the small/medium cap companies being listed.

Finnish retail investors still do not have enough capital and appetite to lift these newly listed stocks to the value they deserve.

Hopefully the new Retirement Investment Account (RIA or Osakesäästötili in Finnish) introduced on January 1st 2020 will help. This account is aimed at Finnish individual investors intending to invest in Helsinki exchange listed stocks.

The tax advantage is that Finns can now sell and buy Finnish stocks inside the account tax free, avoiding the 30% Capital Gains tax, and enjoying tax free dividends at the same time.

Considering this tax incentive, this is likely to give Finnish stocks a boost in 2020, but how big we will see.

This is one of the main reasons why there are still many advantageous opportunities for international retail investors in the Finnish stock market who want to purchase excellent quality companies at relatively cheap prices right now.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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