Nordstjernan as an owner
Nordstjernan’s main task is to provide every company it has ownership stakes in with a competent and professional board of directors to support the company’s CEO and management team. In companies where Nordstjernan is a major owner, the board of directors usually includes at least one member from Nordstjernan.
Nordstjernan contributes experience, knowledge and competence with respect to board work as well as capital for supplemental acquisitions and major development projects. Thanks to its broad business network, Nordstjernan can also help to open the door to new markets. Nordstjernan creates value growth by acquiring and developing companies. When Nordstjernan becomes shareholder of a company, its intention is to remain with the company for many years to come. NCC, which was formed in 1928, is Nordstjernan’s oldest holding.
Nordstjernan’s largest owner is the Axel and Margaret Ax:son Johnson Foundation for Public Benefit, which allows the value created in Nordstjernan to benefit society as a whole. Since 1999, the foundation has elected to support the liberal arts and social sciences.
The success of Nordstjernan’s business model is reflected in the company’s value growth. Between 1999 and 2018, Nordstjernan’s net asset value grew from just under SEK 3 billion to SEK 30 billion, corresponding to an average annual increase of 14 percent (including reversed dividends). This can be compared with the total return for the Stockholm Stock Exchange, which was 8 percent annually during the same period.
Nordstjernan is usually the largest owner in its companies but not necessarily the majority owner. We welcome shared ownership with other parties, from entrepreneurs and founding families to institutions and other investors. We have positive experience of what can be accomplished by establishing a joint agenda for a company and working together to achieve goals.
Being an active, long-term owner requires time, attention and resources. Accordingly, we only have holdings in a maximum of about 20 companies. Nordstjernan also develops an ownership plan for each company.
Nordstjernan is an investment company whose business concept is to create long-term value growth, defined as net asset value growth and increase of the net profit, through active ownership. We are organized in three investment teams: Listed holdings which focuses on investments in publicly traded companies, Unlisted holdings which focuses on investments in privately held companies, and Credit investments which invests in high-yield corporate loans, bonds and preferred equity instruments in listed as well as unlisted companies.
Nordstjernan’s strategy is to actively own and develop companies with head offices in the Nordic region. This does not necessarily mean that the companies’ operations must be focused on the Nordic region. We are also searching for companies with exposure to other markets than the Nordics that carry out add-on acquisitions globally. By being an active and responsible owner, Nordstjernan creates industrial and commercial values. We have a long-term and industrial view on company development, which means that we have the possibility to carry out the strategic initiatives which are in the long-term best interest of our companies.
Nordstjernan creates value growth through long-term development of companies. This means that we cannot have too many holdings. Nordstjernan adds value by combining industrial and financial expertise supported by a broad business network. The active ownership is primarily exercised through board work and by providing advisory services to the companies’ management teams. We appoint experienced and committed boards, which can assist the management teams of our companies.
Nordstjernan has a debt-free balance sheet and invests its own capital. The size of an equity investment is normally in the range of SEK 500 million to SEK 3,000 million. We can also make smaller investments if we have identified opportunities for supplementary investments. We are industry independent and invest in companies within mature industries as well as growth companies. For instance, we invest in companies in need of external capital, industrial competence and networks, either in order to continue to expand through organic growth and add-on acquisitions, or to carry out cost and capital rationalizations. We also invest in companies that are in the process of making ownership changes and are searching for a new long-term owner. Nordstjernan is usually the largest owner in its companies but not necessarily the majority owner. We welcome shared ownership with entrepreneurs and other investors.
Nordstjernan has a strong capital base and a scope for investments of some SEK 5 billion. This gives us the possibility to act forcefully in declining markets and to capture business opportunities regardless of when in a business cycle that they arise. It also gives us the possibility to take action and become the principal owner when fundamentally sound companies end up in financial difficulties, for instance due to too high financial leverage.
Every year, Nordstjernan analyzes a large number of companies and investment opportunities. Only a few of these meet our investment criteria and lead to transactions.
The investment team is often contacted by potential sellers and business partners with ideas and proposals they wish to present. However, the majority of the investment projects are generated internally, either through systematic reviews of industries and geographic markets to test various investment hypotheses or through more opportunistic concept creation.
Nordstjernan’s investment team has often been in contact with the company’s management and owners over a long period of time before a transaction occurs. This builds mutual trust and an understanding of the business.
Prior to each acquisition, a due diligence of the company is performed in order to evaluate risks and opportunities related to the investment and to develop an ownership plan outlining how the investment will create value.
Shareholders can be divided into two categories based on their approach to their ownership role.
Passive owners – often asset managers – buy and sell shares in order to make money on value increases and dividends, without helping to ensure that the company they own shares in is increasing in value. The focus for these owners is on the timing of the purchase and sale. What happens in the underlying company is only relevant as an incentive to buy or sell.
Active owners – often entrepreneurs, a founding family or a dedicated investor – create value by contributing to the company’s performance in the form of capital and expertise. It is unusual for active owners to be involved in more than a handful of companies at a time.
Private equity companies and activist funds are often a hybrid of the two. They buy and sell shares, but unlike asset managers, also contribute in various ways during their ownership period to increasing the value of the companies they invest in. The way in which they finance their investments – raising capital in funds that are then liquidated after a certain number of years – means that they can only be an owner for a limited period of time.
In most countries, large listed companies are owned by pension funds and other institutions whose aim is to manage their capital by acquiring, owning and selling securities – not to assume ownership responsibility. Sweden is unusual in this respect. Approximately four of five companies on the Stockholm Stock Exchange have distinct, long-term principal owners. Almost regardless of which time period you look at, the Stockholm Stock Exchange has outperformed the global indexes. The presence of long-term owners is an important factor in this.
For more than 125 years, Nordstjernan has developed competitive companies that in turn have achieved prosperity. The companies that Nordstjernan has ownership stakes in contribute to society as employers, tax payers and producers of in-demand goods and services. Developing companies benefits society.