State strikes back against controversial Aker sales
April 14, 2009
Prime Minister Jens Stoltenberg had to launch straight into damage control exercises upon his return from the Easter holidays, ordering executives at partially state-owned Aker Solutions to “clean up” after a deal that’s cost taxpayers dearly. Aker officials, meanwhile, claim the state needs to do some “cleaning up” itself.
Stoltenberg, under political fire over the deal, all but demanded that Aker Solutions nullify its purchase of four other Aker firms that can benefit Aker boss Kjell Inge Røkke at the expense of other shareholders like the state.
It was just before the long Easter holidays that Stoltenberg was hailing Røkke as a “great industry pioneer.” The prime minister, whose government had approved the state’s controversial purchase of a large stake of Aker stock in a stated effort to secure jobs, had agreed to appear at a special Aker company event where he made an unusual endorsement of Røkke’s business leadership. Røkke has supported Stoltenberg’s Labour Party, and the scene at the Aker event was all smiles and pats on the back.
Now they’re locked in a major power struggle that pits Røkke’s almost legendary business tactics against Stoltenberg’s social welfare politics, and has left Stoltenberg desperately needing to defend state ownership in private companies.
That’s because the state’s investment in Røkke’s business empire already has cost Norwegian taxpayers billions of kroner, largely because of sinking stock markets, and now Røkke seems to have orchestrated a deal that only benefits himself at the further expense of taxpayers and other shareholders. The Stoltenberg government’s agreement to invest in Røkke’s empire was seen by many commentators as a huge state gift to Røkke at the time. Now the prime minister has been fooled, claim both newspaper editorial writers, stock analysts and even the state’s own representative on Aker Holding’s board, Berit Kjøll.
Stoltenberg’s administration approved the purchase of a 30 percent stake in Aker Holding, a firm set up by Røkke in 2007. Røkke controls 60 percent of Aker Holding, while Swedish investors hold the remaining 10 percent. Aker Holding owns 40 percent of Aker Solutions, giving the state an indirect stake of 12 percent in what used to be industrial concern Aker Kværner.
Stock market bomb
News that Aker Solutions had agreed to take over four other Aker-related firms hit the stock market like a bomb on the very day that Stoltenberg was hailing Røkke. Analysts condemned the deal, claiming that Aker Solutions was paying inflated prices for the Røkke-controlled Aker firms, assuming their financial obligations and taking on debt in the process. Aker Solutions’ share price took a dive, and the state and other shareholders logged more large paper losses.
Stoltenberg, who was informed of the deal just moments before appearing with Røkke, initially didn’t seem worried about it. But the storm of criticism around it has forced him to reconsider. Stoltenberg has so far refrained from lashing out at Røkke himself, saying only that Aker officials “must clean up” after themselves and possibly reverse the deal. The state believes the deal violated shareholder agreements tied to the state’s initial investment in Aker Holding.
Stoltenberg refused to answer repeated questions as to whether he feels fooled, cheated or angered by Røkke and Aker executives’ dealings. He did allow that shareholders other than Røkke were “badly treated” and that the entire deal should be re-evaluated by Aker’s corporate assembly.
Aker stands by its deal
Aker officials, meanwhile, claim the deal is valid and involves no violations. They have apologized, however, for causing any distress for Stoltenberg and his government.
Commentators keep wondering how Aker Solutions’ executives can continue to defend the deal, given the stock market’s brutal response to it. Newspaper Dagens Næringsliv (DN) questioned the role of Aker Solutions CEO Simen Lieungh, and why he isn’t listening to all his shareholders instead of just Røkke.
DN also reported that the state’s representative to Aker Holding, Berit Kjøll, was given detailed information about the deal a week before it was completed, but failed to inform the government. Aker officials have criticized the state’s handling of the deal, not their own.
Views and News from Norway/Nina Berglund