Skanska settles Scancem merger legality issues with EU

PRESS RELEASE, OCTOBER 12, 1998                      77/98

Skanska settles Scancem merger legality issues with EU

Skanska has made an offer to the European Commission that should conclude the Commission's investigations of Scancem and avert a potential breakup of the company. The Commission cases concerned possible violations of the European competition rules in connection with both the 1995 merger between Euroc and Aker which formed the new Scancem and the 1997 purchases by Skanska of increased shareholdings in Scancem.

To avoid a prolonged period of legal uncertainty, which would be detrimental to Scancem´s operations and to the value of the company, Skanska has made a settlement offer, which it is confident will be ratified by the Commission.

The settlement of the two cases will require that:

- Scancem will dispose of its cement operations in Finland or execute an equivalent cement restructuring; and
- Skanska will dispose of its shareholding in Scancem.

Skanska previously announced its intention to dispose of its Scancem holdings as part of the new management's determination to focus the company´s activities on its core business in construction services and development of projects and real estate.

Skanska will be free to exercise control of Scancem as from mid November, when the formal decision of the Commission is expected.

Commenting on the settlement, Skanska´s CEO, Claes Björk, said:

"In both cases, it became clear to us that the Commission was going to proceed to a formal decision, despite our detailed submissions on the cases. As the major owner in Scancem, we saw it as our responsibility to find an early resolution of these matters and to maximize shareholder value. The settlement removes the legal uncertainty and avoids a long running and high-risk legal confrontation. Given the circumstances, we believe that this is the best way to preserve values in Scancem, to the benefit of the company and its shareholders".

A press conference with CEO Claes Björk will be held today in Brussels at the Dorint Hotel Brussels, Boulevard Charlemagne 11, 11.00 CET. There will be a video conference link to Skanska's head quarters in Stockholm, Vendevägen 89, Danderyd.

 

Danderyd, October 12, 1998

SKANSKA AB
Corporate Communications

 

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For further information, contact:
Anders Nyrén, CFO Skanska AB, Tel +46 753 86 32
Staffan Schéle, Corporate Finance and Investor Relations Skanska AB, Tel +46 8 753 88 00
Cecilia Schön, Senior Vice President Corporate Communications Skanska AB, Tel +46 8 753 87 99

 

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Background information

Skanska is subject to two Commission cases:

- The investigation of its acquisition of sole control of Scancem in October 1997 (the 1997 case); and

- The investigation of its earlier acquisition of joint control of Scancem (this is said to have occurred at the time Scancem was established by the 1995 merger of Euroc and Aker's cement and building materials businesses) (the 1995 case).

At the time of the establishment of Scancem (by the Euroc/Aker merger), both Skanska and Aker had a 33.3% shareholding in Scancem. In October last year, Aker and Skanska increased their holdings in Scancem to give them voting rights of respectively, 41% and 48%.

The Commission's investigations track these shareholder movements:

(I)   The 1995 case being concerned with joint control by two shareholders (Skanska and Aker) on 33.3%; and

(II)   the 1997 case being concerned with Skanska's acquisition of sole control by increasing its shareholding from 33.3% to 48%, in response to Aker's acquisition of additional shares increasing its voting rights to 41%.

The 1997 case was the subject of a Commission notification in April of this year and a second stage Merger Regulation procedure in July of this year.

The 1995 case has been the subject of extensive enquiries since 1996, with a dawn raid in April of this year and detailed questionnaires in August. The Commission's Dawn Raid took place at the offices of Skanska and Scancem and marked the first time the Commission has made a Dawn Raid in merger cases, highlighting the seriousness with which the Commission viewed the 1995 case against the Scancem merger. The Commission has confirmed that it would bring formal proceedings in respect of this matter despite detailed submissions made by Skanska.

As Skanska's press release of this morning has made clear, Skanska has made a settlement offer to the Merger Task Force (which it expects to be accepted by the Commission) in the following terms:

- Scancem will dispose of its Finnish cement interests or execute an equivalent cement restructuring: and

- Skanska will dispose of its shareholding in Scancem.

Skanska will be cleared to exercise its full controlling voting rights in Scancem pending these divestments.

The settlement of the 1997 case was straightforward since this required a disposal by Skanska of its Scancem shares which has been Skanska's stated public intention.

Skanska considers that it was particularly in the interests of Scancem shareholders to settle the 1995 case for the following reasons:

- It was clear that the Commission would open official proceedings concluding in a decision

- The Commission had indicated that it was not persuaded by detailed submissions made in relation to the substance of the case

- Accordingly, the outcome of the case was highly uncertain; the most probable sequence being a negative decision and an appeal to the Courts in Luxembourg

- The timescale of such litigation was estimated to be between two and three years.

Prolonged legal uncertainty over the validity of the 1995 creation of Scancem was considered likely to affect it negatively in a number of material respects:

- Downward pressure on its share price since the Commission's case (if successful) was expected to result in a break-up of Scancem's key Swedish and Norwegian cement interests, including Scancem International

- Pressure upon its trading reputation and performance, caused by the uncertainty over its future

- Depressed key employees/staff morale

- Substantial imposition upon key management time and financial resources in conducting longrunning litigation.

In addition, there was a risk of material fines for implementing the 1995 merger without the necessary Brussels clearance.

The early resolution of the matter removes the legal uncertainty and avoids a long running and high-risk legal confrontation.

A disposal of Scancem's Finnish cement interests is expected to preserve Scancem shareholder value and will leave in place Swedish and Norwegian cement interests, including Scancem International. As noted, these cement interests were considered to be in jeopardy had formal proceedings run their course.

It is hoped that a settlement will substantially reduce, if not remove, the prospect of material fines for implementing the 1995 transaction without prior clearance.