On both sides of the table

The focus has been on FL Group and Glitnir’s ways of doing business lately. Morgunbladid reveals today what everybody suspected, that this is standard business practice amongst those who were lucky enough to own the banks, so much that it could be called the Icelandic way (my suggestion).

When you are in control on both sides of the table, as Bjorgolfur Gudmundsson and Bjorgolfur Thor were in a brilliant deal (from their perspective), it becomes easy to wheel and deal with other people’s money.

Translation from Bjarni Olafsson’s excellent article:

On September 22nd 2004, KEA sold its 27,1% part of Kaldbakur to Kaldbakur itself at 7,9 per share. The purchase was therefore worth 3,74 billion ISK. These stocks were then sold forward to Samson Global Holdings, owned by Bjorgolfur and Bjorgolfur Thor, for the same 7,9 per share.

Two days later, on September 24th, it was announced that Kaldbakur and Burdaras would merge. A deal had been struck with Kaldbakur’s three biggest shareholders, Samson with 27,1%, Samherji with 25% and Baugur 24,8%, that they would be reimbursed in Burdaras stock.

It caught people’s attention that Burdaras bought the Kaldbakur stock for 9,16. The stock that Samson had bought for 3,74 billion was therefore sold to Burdaras for 4,34 billion and Samson made a profit of 600 million ISK in two days.

Bjorgolfur Thor who owned Samson with his father Bjorgolfur Gudmundsson was the Chairman of the board at Burdaras at the time.

It is also worthy of note that through this deal, Samson got 2,97% in Burdaras for the beforementioned 4,34 billion at a price of 14,36 per share. That day Burdaras on the other hand was trading for 15,00.  So if Samson would have had to buy these shares on the market the same day it would have cost them 190 million kronas more.

Samson therefore made almost 800 million on this deal. Firstly by selling Burdaras the Kaldbakur stock for 600 million kronas more than they had paid for them two days before. Secondly by acquiring 2,97% in Burdaras for 190 million kronas less than if bought on the market.

Kaldbakur and Burdaras were both public companies, listed on the Stock Exchange and each of them had thousands of shareholders. Bjorgolfur Thor was the Chairman of the board of Burdaras, courtesy of Samson’s 16,84% share in the company and therefore sat on the both sides of the table.

So business as usual for the “oligarchs”, at a considerable cost for other shareholders.


2 Responses to “On both sides of the table”

  1. 1 Roy December 11, 2008 at 2:11 pm

    Wait until the Icelandic SEC hears about this, heads are sure to roll!

  2. 2 Deep Boat December 11, 2008 at 3:39 pm

    They need to start making handcuffs in Iceland first!

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