Recommended public exchange offer to the shareholders of Topdanmark – Q&A

On 17 June 2024, Sampo and Topdanmark entered into a combination agreement, pursuant to which Sampo will make a recommended best and final public exchange offer to acquire all of the outstanding shares in Topdanmark not already owned by Sampo. 

Following completion of the offer, Sampo intends to integrate Topdanmark into If P&C to strengthen its position as one of the leading insurers in the Danish P&C insurance market and to consolidate the Sampo Group’s leadership position in the Nordics.

In this blog entry, we address questions shareholders might ask regarding the offer at this point.

What is the timeline of the offer?

The indicative timeline of the offer is as follows: 

• 9 July 2024 – Extraordinary General Meeting of Sampo
• July/August 2024 – Publication of the prospectus and the offer document and commencement of the offer period
• August/September 2024 – End of offer period
• September 2024 – Completion of the offer (subject to all conditions for completion having been fulfilled).

All dates are preliminary and subject to change.

Where can I find more information about the offer? 

Relevant documents regarding the offer, including the announcement release and the investor presentation, are available at www.sampo.com/topdanmark. 

Please note that further information about the offer will be made available in the prospectus and the offer document, which are currently expected to be published in July/August 2024. 

We recommend that all shareholders read the documents made available on this website, including the prospectus and the offer document, once published.   

Why did you decide to do the offer now?

After the Nordea exit and Hastings minority acquisition in 2022 and the Mandatum demerger in 2023, this is a logical next step in our strategic agenda. Topdanmark has also been focusing on P&C insurance, which makes our strategies further aligned. 

Scale and investments in technology and digitalisation have become more and more important. Thus, we believe this is the right time to combine our strength to build a more competitive entity in Denmark as higher level of digitalisation has increased available synergies. 

Why did you decide to do the offer as an exchange offer instead of cash offer?

An exchange offer preserves the strength of Sampo’s balance sheet. Since the combination is expected to be EPS accretive, we are putting ourselves in a better position to deliver EPS growth and increase deployable capital generation. This also aligns the interests of Sampo and Topdanmark shareholders in the long term. 

Moreover, Sampo expects to seek to obtain an approval from the Danish Tax Authorities confirming that Topdanmark shareholders who are tax residents in Denmark can tender their Topdanmark shares for Sampo A shares in the offer without triggering any Danish tax payment as a result of the offer.

Why did you not sell Mandatum and use the proceeds to acquire Topdanmark?

During the strategic review of Mandatum, we were never offered a deal that would have created as much shareholder value as the demerger and listing of Mandatum has done. As Mandatum’s total shareholder return since October 2023 shows, the demerger has been very value creative to Sampo shareholders who have held their Mandatum shares. 

How would Topdanmark shareholders benefit from the completion of the offer?

Under the terms of the offer, shareholders of Topdanmark will receive 1.25 newly issued Sampo A shares in exchange for each share held in Topdanmark. The consideration represents a premium of 27 per cent to the closing share price of the Topdanmark share on Nasdaq Copenhagen on 14 June 2024.

The offer provides Topdanmark shareholders with the opportunity to participate in the future value creation of Sampo Group with transaction synergies, stronger growth perspectives and greater diversification.

What tax implications would the completion of the offer cause to Topdanmark’s shareholders?

The deal is expected to be tax neutral for Topdanmark shareholders who are tax residents in Denmark. However, the fractional entitlements for Danish shareholders will be taxed as dividends and shares redeemed in cash in a potential squeeze-out will be treated as capital gains, if the Danish shareholder is fully settled in cash.

The transaction may have tax consequences for Topdanmark shareholders in other jurisdictions, who should seek their own tax advice.

Further information regarding taxation will be provided in the prospectus and the offer document. 

How would Sampo shareholders benefit from the completion of the offer?

The offer is expected to be EPS accretive and to increase deployable capital generation through the estimated synergies and would simplify the group structure and governance and improve our position in Denmark.

What kind of synergies would the completion of the offer create?

There are significant potential synergies with the offer and planned integration as it would strengthen Sampo’s and Topdanmark’s overall scale and competitive position in the Danish P&C insurance market.

The total annual pre-tax run-rate synergies are expected to amount to approximately EUR 95 million. Around 70 per cent of the run-rate synergies are estimated to come from costs, such as IT portfolio optimisation, increased operational digitalisation, and unified procurement and fraud detection functions, and around 30 per cent is estimated to be revenue synergies through e.g. scale benefits and improvements to online sales capabilities and pricing and risk selection. 

Additional potential net savings from lower one-off IT investments related to Topdanmark’s ongoing digital transformation (not included in run-rate synergies), may also be possible.

How would the completion of the offer affect Sampo’s earnings?

The total annual run-rate cost and revenue synergies are expected to drive EPS accretion of approximately 6 per cent, based on 2025 consensus earnings expectations.

Would the completion of the offer affect Sampo’s dividend policy or the trajectory of the regular dividend?

The completion of the offer would not affect our dividend policy. We aim to pay a stable regular dividend that grows with operating result over time. As the combination is expected to be EPS accretive, it would be supportive for higher dividend capacity.

Would the completion of the offer affect Sampo’s financial targets for 2024-2026 announced at the Capital Markets Day in March 2024?

We remain committed to the financial targets announced at the Capital Markets Day, and it is expected that the combination will only enhance them. 

Sampo intends to raise its target for deployable capital generation over 2024-2026 from more than EUR 4 billion, as announced at Sampo’s capital markets day in 2024, to over EUR 4.5 billion, on successful completion of the offer, reflecting the acquisition of Topdanmark and the capital optimisation actions completed during the first half of 2024.

Would the completion of the offer change Sampo’s view on returning any deployable capital to shareholders?

We remain committed to our capital management framework announced at the Capital Markets Day in March 2024.

In line with Sampo Group’s commitment to capital efficiency, and to offset share count dilution from offer, the Board of Sampo has resolved to deploy EUR 800 million of capital through a new share buyback programme and potential squeeze-out of Topdanmark’s minority shares.

In light of the offer, and Sampo’s commitment to disciplined capital management, the Board intends to give clear priority to capital returns to shareholders when allocating the remaining deployable capital generated over 2024–2026.

Sampo repurchased over 53 million own shares at an average price of EUR 44.40 per share in 2021-2023. How does issuing new shares in exchange for Topdanmark at a price currently around EUR 40 per share make sense?

In 2021-2023, Sampo shares mostly traded at discount to our Nordic peers, whereas now the valuation is in line with them. Adjusting for the dividends paid in 2022-2024 and the Mandatum demerger, the average repurchase price was around EUR 35 per share. 

I’m a Topdanmark shareholder, what do I have to do?

Further instructions on how to tender your shares in Topdanmark will be provided in the offer document expected to be published in July/August 2024. 

I’m a Sampo shareholder, what do I have to do?

Sampo shareholders can use their voting rights at the Extraordinary General Meeting on 9 July 2024, which will resolve on authorising the Board of Directors of Sampo to issue new A shares as consideration in the offer. Further instructions are available in the Notice to the Extraordinary General Meeting.  

Important notice 

Not for publication, distribution or release, in whole or in part, directly or indirectly, in or into Australia, Hong Kong, Japan, New Zealand, South Africa or Singapore or any other jurisdiction in which publication or distribution would be unlawful. 

The exchange offer is not subject to the relevant rules in Chapter 8 of Danish Consolidated Act no. 198 of 26 February 2024 on capital markets (the “Danish Capital Markets Act”) and Danish Executive Order no. 636 dated 15 May 2020 on takeovers (the “Danish Takeover Order”). The offer document has not been and will not be reviewed or approved by the Danish Financial Supervisory Authority or any other financial supervisory authority or by any stock exchange. This publication is not a public takeover offer within the meaning of the Danish Capital Markets Act or within the meaning of the Danish Takeover Order.

This publication includes “forward-looking statements.” These statements may not be based on historical facts but are statements about future expectations. When used in this publication, the words “aims,” “anticipates,” “assumes,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “should,” “will,” “would” and similar expressions as they relate to Sampo, Topdanmark or the exchange offer, identify certain of these forward-looking statements. Other forward-looking statements can be identified in the context in which the statements are made. Forward-looking statements are set forth in a number of places in this publication, including wherever this publication includes information on the future results, plans and expectations with regard to, following completion of the exchange offer, the combined group’s business, including its strategic plans and plans on growth and profitability, and the general economic conditions. These forward-looking statements are based on present plans, estimates, projections and expectations and are not guarantees of future performance. They are based on certain expectations, which may turn out to be incorrect. Such forward-looking statements are based on assumptions and are subject to various risks and uncertainties. Shareholders should not rely on these forward-looking statements. Numerous factors may cause the actual results of operations or financial condition of, following completion of the exchange offer, the combined group to differ materially from those expressed or implied in the forward-looking statements. Neither Sampo nor Topdanmark, nor any of their respective affiliates, advisors or representatives or any other person undertakes any obligation to review or confirm or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise after the date of this publication.

This publication includes estimates relating to the cost and revenue synergy benefits expected to arise from the exchange offer (which are forward-looking statements), which have been prepared by Sampo and Topdanmark and are based on a number of assumptions and judgments. Such estimates present the expected future impact of the exchange offer on, following completion of the exchange offer, the combined group’s business, financial condition and results of operations. The assumptions relating to the estimated cost and revenue synergy benefits and related integration costs are inherently uncertain and are subject to a wide variety of significant business, economic, and competitive risks and uncertainties that could cause the actual cost and revenue synergy benefits from the exchange offer, if any, and related integration costs to differ materially from the estimates in this publication. Further, there can be no certainty that the exchange offer will be completed in the manner and timeframe described in this publication, or at all.

This publication is neither a tender offer document nor a prospectus and as such does not constitute an offer or invitation to make a sales offer. Investors shall accept the offer for the shares only on the basis of the information provided in a tender offer document and a prospectus. Offers will not be made directly or indirectly in any jurisdiction where either an offer or participation therein is prohibited by applicable law or where any tender offer document, prospectus or registration or other requirements would apply in addition to those undertaken in Denmark and Finland.

In any member state of the European Economic Area other than Denmark and Finland (each a “Relevant State”), this publication, including any attachments hereto, is only addressed to, and is only directed at the shareholders of Topdanmark in that Relevant State that fulfil the criteria for exemption from the obligation to publish a prospectus, including qualified investors, within the meaning of the Regulation (EU) 2017/1129, as amended (the “Prospectus Regulation”).

This publication is not an offer of securities in the United States and it is not intended for distribution in any jurisdiction in which such distribution would be prohibited by applicable law. The shares referred to in this publication has not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or the securities laws of any state of the United States (as such term is defined in Regulation S under the U.S. Securities Act) and may not be offered, sold or delivered, directly or indirectly, in or into the United States absent registration, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and in compliance with any applicable state and other securities laws of the United States. This publication does not constitute an offer to sell or solicitation of an offer to buy any of the shares in the United States.

The exchange offer is being made in the U.S. in reliance on the expected availability of the Tier II exemption pursuant to Rule 14d-1(d) of, and otherwise in compliance with Section 14(e) of, and Regulation 14E promulgated under, the U.S. Securities and Exchange Act of 1934, as amended (the “U.S. Exchange Act”), and otherwise in accordance with the requirements of Danish law. The exchange offer is not subject to Section 14(d)(1) of, or Regulation 14D promulgated under, the U.S. Exchange Act.

This publication has been prepared on the basis that any offer of the share consideration referred to in this publication in the United Kingdom will be made pursuant to an exemption under the Financial Services and Markets Act 2000 (as amended, the “FSMA”) from the requirement to produce a prospectus for offers of the share consideration. Accordingly any person making or intending to make an offer of the share consideration referred to in this publication in the United Kingdom may only do so in circumstances in which no obligation arises for Sampo to publish a prospectus pursuant to section 85 of the FSMA or supplement a prospectus pursuant to Article 23 of Regulation (EU) 2017/1129 as it forms part of domestic law in the United Kingdom by virtue of the European Union (Withdrawal) Act 2018, in each case, in relation to such offer. Sampo has not authorised, nor does it authorise, the making of any offer of the share consideration referred to in this publication in circumstances in which an obligation arises for Sampo to publish a prospectus for such offer. In the United Kingdom, this publication is only addressed to and directed at persons who (i) are investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”), (ii) are high net worth entities or other persons falling within Article 49(2)(a)-(d) of the Order, or (iii) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) in connection with the issue or sale of any securities may otherwise lawfully be communicated or caused to be communicated (including on the basis that the transaction to which this publication relates will fall within article 62 of the Order, to which the provisions of section 21 of the FSMA do not apply) (all such persons together being referred to as “Relevant Persons”). Any investment or investment activity to which this publication relates is available only to Relevant Persons in the United Kingdom and will only be engaged with such persons.

The share consideration referred to in this publication will be issued to Canadian shareholders of Topdanmark pursuant to a prospectus exemption in accordance with applicable Canadian securities laws. The share consideration has not, however, been qualified for distribution by way of a prospectus in Canada and no Canadian securities regulatory authority has expressed an opinion about the share consideration and it is an offence to claim otherwise. The share consideration has not been and will not be listed on a Canadian securities exchange and neither Sampo nor Topdanmark intends to take any action to facilitate a market in the share consideration in Canada, nor anywhere else.