Norway plays on national pride

There is an all-too familiar ring to the controversy encircling Norway's Storebrand, the country's largest insurance group. The struggle for control bears all the hallmarks of other conflicts played out in this small - but oil-rich - Nordic nation.

The conflict pits the forces of internationalism represented by Sampo, the Finnish bank assurance group, against Norway's Den norske Bank, which is offering to create a national financial champion in a market increasingly dominated by foreign institutions.

Comments on Sunday by finance minister Carl Eirik Schjott-Pedersen that it was "of vital Norwegian interest that Storebrand remains a Norwegian company that is owned and run from Norway" are reminiscent of statements made by the government at the time of Elf of France's unsuccessful bid for Saga Petroleum in 1999. Saga was swallowed up by domestic rival Norsk Hydro.

Foreign control in the financial sector has been a particularly sensitive issue, after Christiania Bank, Norway's second-largest, last autumn fell into the hands of Nordea, a Nordic bank, when many Norwegians would have preferred it to merge with DnB.

Although Sunday's proposal by DnB for a combination with Storebrand is worth less to shareholders than Sampo's bid, observers say that DnB may be able to get its way in the long run.

One obvious method is for DnB to use its 6 per cent stake in Storebrand to build a blocking minority position, either by lifting its stake to 10 per cent or by combining with another party.

Norwegian regulatory authorities may also delay the approval process so that DnB gets the time to fine-tune its offer. Yet Bjorn Wahlroos, Sampo's chief executive, is confident that such hurdles can be cleared. "This may be sort of a childish reflection on my trust in markets, but somehow I still believe that reason and industrial logic as well as financial interests will prevail," he said yesterday.

Indeed many analysts believe the deal will be difficult to stop. The Norwegian state does not hold a direct stake in Storebrand and using its position in DnB to persuade the bank to make a higher bid would be difficult.

"The present DnB offer is already dilutive to its existing shareholders and to increase the bid further would increase the dilution, something I not sure that DnB's shareholders would be very happy with," said William Hawkins, analyst at Fox-Pitt, Kelton.

Such a move would hardly help improve investor confidence in the run-up to the government's partial privatisation of Statoil, the petroleum group, an offering which could be worth up to NKr45bn ($4.96bn).

Sampo's offer also neatly deals with one of Storebrand's big problems - its non-life operations, which have been joined with those of Sweden's Skandia in If. Storebrand owns 44 per cent of the lossmaking If, which was to have been floated in early 2001.

Introducing a Finnish leg to the joint venture will give If bulk and go a long way to fulfilling its original pan-Nordic strategy.

It will also make it a more attractive target for an industrial buyer such as the UK's Royal Sun Alliance.

Yet Mr Wahlroos must tread carefully when tackling DnB's nationalism-based arguments.

After all, many would suggest the Finnish government orchestrated the merger of Sampo and Finland's state-owned Leonia bank in an attempt to create a national champion.

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