(Bloomberg) — When Cevian Capital boosted its stake in Swiss insurer Baloise Holding AG last year, insurance firms across Europe got ready for the activist investor to go straight for its usual playbook.
Companies including Axa SA and Allianz SE began to study whether Cevian’s engagement could put the Basel-based company, or some of its divisions, into play as takeover targets.
Cevian has a track record of triggering often dramatic strategic change, at times even breaking up longstanding businesses. At Baloise, where it had a stake of about 9%, it pushed management to focus on its core Swiss business and sell other assets, such as a regional lender and a struggling German unit, Bloomberg News has reported.
In the end, the Swiss establishment found its own solution to keep foreign buyers at bay, and get Cevian off their backs.
First, Basel-based Baloise announced that it had agreed on a rare “merger of equals” with Helvetia Holding AG, a similarly-sized insurer a 2 1/2-hour drive away in the city of St. Gallen. Bankers and investors speculated that a counter bid could emerge, especially if Cevian was to reject the transaction when it’s put to shareholders.
Then Patria, a little-known cooperative that is also Helvetia’s biggest shareholder, approached Cevian and bought its stake. That sale, announced Friday, lowers the likelihood of any disruption to the deal, even if some question the benefits of a combination.
“I struggle to see the financial logic of this deal,” Kevin Ryan, a Bloomberg Intelligence analyst, said when the tie-up was first announced. “It appears to be a defensive move against activist investor Cevian with making as little changes as possible.”
The combination of the firms will create Switzerland’s second-largest insurance company. Patria will hold roughly 22% in the combined entity, analysts at BNP Paribas SA estimate. The cooperative represents the interests of Helvetia’s policy holders and its statutes say it protects the interest of Helvetia’s economic independence.
Patria “has made it clear that it supports the transaction,” a spokesperson for Baloise said. “We are pleased that Helvetia’s largest shareholder is convinced of the strategic fit and supports the merger of equals.”
Helvetia and Cevian declined to comment.
“We very strongly believe in the merger between Helvetia and Baloise,” Patria said in a statement. “By seizing the opportunity to acquire the Cevian package in Baloise, we are maintaining our position as a reliable principal shareholder.”
While Cevian didn’t succeed in getting Baloise to streamline its operations, it still walks away with a gain on its investment, which it didn’t disclose. Baloise shares closed at 184.20 francs in Zurich on Friday, compared with around 130 francs when reports surfaced in 2023 that Cevian was considering an investment.
The sale to Patria is “a neat conclusion for Cevian,” said Iain Pearce, an analyst at BNP. Based on an estimated 140 francs ($169) paid on average per Baloise share, the investment firm will make a “tidy profit,” he said.
Cevian’s investment in Baloise stretches back to late 2023. Last year, it helped to abolish a rule at the insurer that capped any investor’s voting rights at 2%, regardless of the amount of stock they owned. The removal of the curb made it easier to push for changes.
“Cevian’s engagement was the catalyst for change at Baloise,” said Jens Tischendorf, an ex-partner at Cevian and co-founder of Active Value Partners.
Cevian’s relationship with Baloise Chairman Thomas von Planta subsequently soured, according to people familiar with the matter. Von Planta will now oversee the strategy of the combined firm, which will be named Helvetia Baloise. Helvetia Chief Executive Officer Fabian Rupprecht will run the day to day business as CEO.
The all-share deal values Baloise at about 8.4 billion Swiss francs based on the firms’ latest closing prices. Bloomberg reported earlier that the companies had been exploring a possible combination.
Cevian has pushed through far more significant moves elsewhere. At RSA Insurance Group Plc, it took a stake and eventually saw the company’s sprawling operations broken up, with Intact Financial Corp. and Tryg A/S buying different pieces.
The strategy has made billionaires of Cevian’s founders Lars Foerberg, who lives in Switzerland, and Christer Gardell. Their firm also took a stake in UBS Group AG after the government-brokered takeover of Credit Suisse.
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