Goldman Sachs, two Danish pension funds buy 26% in Dong Energy for $2bn

Goldman Sachs Group and two Danish pension funds on Thursday agreed to buy 26-per cent in Danish state-owned oil and gas group Dong Energy for 11 billion Danish crowns ($2 billion).

Funds managed by the Merchant Banking Division of Goldman Sachs and the Danish pension funds Arbejdsmarkedets Tillægspension (ATP) and PFA Pension Forsikringsaktieselskab (PFA) will invest a total of 11 billion Danish crowns in the company by subscribing for new shares.

Goldman Sachs will subscribe to new shares worth 8 billion Danish crowns and acquire a 19-per cent stake, while ATP will subscribe for 2.2 billion Danish crowns for 5 per cent stake and PFA for 0.8 billion Danish crowns and hold 2 per cent.

Goldman Sachs and ATP will get a board seat each for their investment.

Dong Energy said that the capital increase is part of its financial action plan announced in February 2013 which included an injection of additional equity of at least 6-8 billion Danish crowns.

Post completion of the deal, the Danish government's holding in the company would be reduced from around 81 per cent to about 60 per cent.

Goldman Sachs, ATP, and PFA will seek an initial public offering of Dong Energy when they believe conditions to be right. If the stock floatation is not completed by the time of the release of results for financial year 2017, the new investors will be given the option to sell their shares to the Danish government on pre-agreed terms.

Dong Energy, Denmark's biggest energy company, had said in 2012 that it would divest non-core assets worth $10 billion Danish crowns in 2013-14, reduce costs by 1.2 billion Danish crowns and issue shares worth 6 to 8 billion Danish crowns.

It has since sold assets worth 8 billion Danish crowns and reduced headcount by around 1,000.

''Dong Energy has an exciting and profitable growth potential. With the injection of new equity, we have almost fully delivered on our financial action plan and have thus secured the necessary platform for pursuing our ambitions for the coming years,'' said, Henrik Poulsen, CEO of Dong Energy.

Andrew Wolff, head of Goldman Sachs merchant banking division for  Europe, Middle East Africa and co-head of Asia, said, ''Dong Energy is one of the leading energy companies in northern Europe. Henrik Poulsen and his team are world class managers and have set ambitious goals for the company. We believe in this vision and are excited to work with the company and the Danish State to help grow the business and provide environmentally friendly energy and infrastructure for European markets.''