Deal in Focus: Polaris’s Mols-Linien deal clears stormy weather

More than two months after Polaris Private Equity made its initial bid for Mols-Linien, the GP is finally able to proceed with its plans to de-list the company, which operates two ferry routes across the Kattegat sea.

Having navigated several unforeseen obstacles along the way, the GP has emerged from the deal process with an 80% stake in Mols-Linien, albeit at a higher price than the original bid of DKK 481m for 100% of the company.

Polaris managing partner Jan Johan Kühl told unquote" the final enterprise value of the deal would be around DKK 1.35-1.4bn, pricing 100% of the equity at around DKK 560m. The remaining EV encompasses Mols-Linien's long-term ferry leasing debt.

Despite the higher price, Kühl remains confident the investment will generate good value. "We're past the turnaround," he says, referring to the company's financial troubles following the global financial crisis. "The company is running very well now, so we believe the increased price is justifiable."

With an expected ownership period of five to seven years, Kühl says there are obvious prospective takers for Mols-Linien come exit, in trade buyers and infrastructure funds.

Polaris had an eye on Mols-Linien for a number of years before the deal, but had resisted launching a bid process until recently: "We saw the new management had delivered a real turnaround and put a solid strategy in place for the future. Combined with these three shareholders who were looking to sell, we felt the time was right to test the waters and see if we could cross the finish line."

The approach led to an exclusivity agreement and the option to acquire the investors' combined 76% shareholding, subject to satisfactory due diligence.
Following the acquisition, key priorities include financing the commissioning of a new vessel to eventually replace the oldest ship in Mols-Linien's current three-ferry fleet, and proving the company's turnaround is sustainable.

Changed course
The original plan had been to buy 90% of Mols-Linien's shares, which would have forced the remaining shareholders to relinquish their stakes to Polaris at market price, under the rules of the Danish stock exchange.

Before the bid, Polaris had acquired a 30% stake in the company and received "irrevocable undertakings" to acquire a further 46% from Nykredit Bank and Finansiel Stabilitet at DKK 34 per share. The remaining minority shareholders rejected the offer and tried to rally a large-enough group to block a de-listing, despite Polaris improving the offer to DKK 40 per share.

Henrik Lind, the founder of energy trader Danske Commodities, rocked the boat further by making a competing offer of DKK 41 per share, followed by an improved bid of DKK 44 per share, through his family office Lind Invest. His bid was rejected by the Mols-Linien board, and a subsequent attempt to gain a 10% stake in order to block a forced share buyout was also unsuccessful. Ending up with around 5% of Mols-Linien, Lind has said he intends to be an active shareholder in the company.

Having weathered the storm, Polaris now intends to set a course for de-listing. The GP will name a board at an extraordinary general meeting on 22 October and decide on the take-private. The Copenhagen stock exchange requires a two-thirds majority to take a company private, pending a review, but Kühl believes all formal requirements for a de-listing are met.

Despite not reaching the desired 100% ownership, "the investment will be managed as our other private equity investments, though the minority investors will retain the rights they are entitled to," says Kühl.

Sea of emotions
Despite very limited interest in the company before the take-private bid, Mols-Linien has garnered the most attention of Polaris's four take-private deals. "There has been an abnormal amount of attention considering the relative size of the company and the amount of time it's been for sale," says Kühl.

Mols-Linien's shares were highly illiquid following the financial crisis, when Nykredit and the Danish government's financial stability holding company Finansiel Stabilitet acquired a combined 46% stake through a debt-for-equity swap on credit lines to insolvent real-estate investors.

"We felt we were a knight in shining armour of sorts, but there was still a very small group of investors that managed to attract a lot of attention around the desire not to de-list, and the attention has been much higher than we thought. We thought the bid would sail through relatively problem-free because we offered a very fair price," says Kühl.

"The minority shareholder felt the price wasn't, but we're paying a lot of goodwill for an asset-heavy company and we think we priced in the positive future outlook in our bid," says Kühl. "It's a difficult discussion to have because it gets emotional, but we're happy to have it and are very well-equipped to do so as a Danish fund. Mols-Linien is one of the most important privately owned pieces of Danish infrastructure, so having a familiar owner, who is also Danish and understands the value of the asset, makes it a lot easier for us to have that discussion with investors."

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• Nordics
• Buyouts
• Deal in focus
• Polaris Private Equity
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