Sweden’s new business king takes the long-term view
Fredrik Lundberg is seeking to move Industrivarden on from a business jet scandal
Sweden has a new business king. Fredrik Lundberg, a quietly spoken and reserved 65-year-old, has in the past few years taken steps to dominate the country’s financial and industrial landscape.
Following a business jet scandal that unleashed upheaval at Swedish companies, Mr Lundberg has strengthened his control over an empire that involves big shareholdings in everything from the country’s largest bank, construction group and steelmaker, to the world’s second-largest truckmaker.
His influence at the likes of Handelsbanken, Skanska, SSAB and Volvo Group stems from his role as chairman of Industrivarden, one of two big Swedish investment companies that dominate the Stockholm stock exchange. He is also chief executive of Lundbergs, his family investment company that is Industrivarden’s biggest shareholder.
In a rare interview, Mr Lundberg shrugs off accolades describing him as Sweden’s most powerful businessman.
“I don’t bother about these type of things,” he says. “I try to concentrate on trying to do a good job and act in a way that is value-creating. To be able to create value in the way we do, you have to take a long-term view.”
To this end, Mr Lundberg does not pull his punches when talking about companies that Industrivarden has invested in.
Take Ericsson, one of the world’s leading telecoms equipment makers that Industrivarden has a 15 per cent stake in, and that is struggling with fierce competition.
Mr Lundberg says: “From a shareholder’s point of view, we are not happy and we are not satisfied with the development, and we hope for changes.”
The shake-up has already begun, soon after Industrivarden voiced public criticism of Ericsson, under-fire chief executive Hans Vestberg was ousted last July.
The firing was only the latest in an extraordinary amount of bloodletting at Swedish boardrooms associated with Industrivarden in the past two years.
The spark for the upheaval was allegations about the frivolous use of business jets by managers both of Industrivarden and the groups that the investment company has stakes in.
Mr Lundberg declines to comment on the scandal, but other people in the Industrivarden empire say the real problem at the investment company was not the use of business jets but rather the concentration of power in the hands of Sverker Martin-Lof and Anders Nyren, its former chairman and chief executive.
The two sat on the boards of most of the eight listed companies where Industrivarden is a big shareholder. Cross-shareholdings often complicated responsibilities. Handelsbanken, where Mr Nyren was chairman, was a big shareholder in Industrivarden, where Mr Martin-Lof held the same role.
Sverker Martin-Lof (left) and Anders Nyren © EPA ,
In the spring of 2015, first Mr Martin-Lof and then Mr Nyren were pushed aside by Industrivarden’s board and shareholders, leaving Mr Lundberg to become chairman. Mr Martin-Lof complained at the time that the events were “coup-like”.
Mr Lundberg has since moved quickly to sort out the empire. Outsiders were brought in as chief executives of Volvo, Sandvik, the mining equipment maker, and Industrivarden itself, while new chairmen have been appointed at five of the investment company’s eight holdings. The cross-shareholdings have been dismantled, with both Handelsbanken and SCA, the paper maker, selling stakes in Industrivarden under their new chairmen.
Mr Lundberg portrays Industrivarden as an active and long-term shareholder that engages with the companies it has stakes in at board level, rather than through management.
“It’s very important that we concentrate on choosing the right people in the boards and try to find out what the most important topics for each company are, the value-creating topics,” he says.
Mr Lundberg praises the Swedish system under which there is a clear delineation of functions: the top shareholders propose board members for the annual meeting to vote on, while the board chooses the management.
Another important part of the system is a split between so-called A and B shares, with the former often conferring greater voting rights — arrangements that have been controversial with some US and UK investors in the past.
Unsurprisingly, Mr Lundberg defends the system. “It’s important for every company to have one of a few big shareholders who take a long-term view and long-term responsibility.”
A rival of Mr Lundberg’s at the top of Swedish business says: “Fredrik is very smart and very discreet. When he doesn’t like something he is pretty persuasive.”
Joacim Olsson, head of Aktiespararna, the Swedish association for private investors, says Mr Lundberg “has delivered great returns to shareholders over a long period of time”. He goes on to call him “a perfect example of an active long-term owner”, something he finds important amid the rise of more short-term institutional investors.
Investors in Lundbergs, which has only 10 employees, have seen its shares almost quadruple in the past seven years. The discount to net asset value — a measure for how big the discrepancy is between the value of an investment company’s holdings and its share price — has been erased in the past two years, leading Lundbergs to now have a small and rare premium.
Industrivarden’s share performance has lagged behind that of Investor, Sweden’s other leading investment company run by the Wallenberg family, in the past five years. However, since Mr Lundberg’s appointment as chairman of Industrivarden in 2015, the gap has narrowed modestly.
Mr Lundberg acknowledges there is more work to be done by him and Helena Stjernholm, Industrivarden’s chief executive. “We have come a bit of the way. But . . . you don’t change companies in one year,” he says.
He suggests a number of areas for improvement at the companies that Industrivarden owns stakes in.
One is finding the right organisational structure. He praises both Handelsbanken and Skanska for their decentralised organisations, adding that Volvo, Sandvik and Ericsson could all benefit from such arrangements.
Another priority is having strong finances with not too much debt, and Industrivarden is cutting its borrowings. “In all companies, it’s very important to have a strong balance sheet,” says Mr Lundberg. “Then you don’t get dependent on banks . . . It’s also nice to be able to sleep at night.”
Shareholder insists on staying in control
When Fredrik Lundberg entered the Swedish business founded by his father in 1977, it was focused on real estate and construction. The younger Mr Lundberg wanted to diversify so Lundbergs soon went into finance, venture capital, real estate and smaller industrial groups.
A slimming down of the company in the 1990s led Mr Lundberg to concentrate purely on real estate and investments in Sweden.
Real estate was moved into a wholly-owned subsidiary — now run by Mr Lundberg’s 37-year-old daughter, Louise Lindh — while Lundbergs holds stakes in eight listed companies.
Through its 23 per cent stake in Industrivarden, Lundbergs has exposure to 13 listed groups in total. “That is a good diversification, not too many and not too few,” says Mr Lundberg.
Associates say Mr Lundberg likes to be hands-on: for instance, taking a flight to check up on a Skanska building site in Poland.
Mr Lundberg also insists on staying in control. Unlike the other big family-run investment company in Sweden — controlled by the Wallenbergs — Mr Lundberg and his relatives own their stakes in Lundbergs directly rather than through a foundation.
Both his daughters, who together have five children, serve on the boards of some of the companies that Lundbergs has stakes in.
Family-run companies can run into problems due to squabbling, and Mr Lundberg concedes there could be practical issues for Lundbergs in the “fifth, sixth or seventh generation”, but that will not be a concern for him. He adds, pointedly: “I will try to be in business for quite a long time yet.”
