The sale of a 70% stake in Saxo Bank to J Safra Sarasin brings to an end a peculiar 8 year-long period in which half of the Danish brokerage group was owned by a Chinese carmaker and another 20% by a Finnish financial conglomerate.
To understand why that happened in the first place, you need to go back to 2017. At that point, Geely (the carmaker) was expanding very aggressively. They had bought Volvo, Lotus, and the company that makes London taxis all in a relatively short period of time.
For whatever reason, they wanted to expand into other industries, beyond the automotive sector. The decision to acquire a stake in Saxo was part of those efforts.
For Saxo, it meant that one of the co-founders, Lars Seier Christensen, could exit the business entirely. The main benefit that the group was supposed to accrue was access to China. That never really materialised, mainly because of a regulatory crackdown that has made the market there much more difficult to access.
The other buyer in 2017 was Finnish financial services business Sampo. Danish asset manager Mandatum, which was part of Sampo, split off from the company in 2024 and ended up taking on the stake in Saxo Bank.
My guess is that this was either a bolt on to boost group earnings or they thought there could be some synergies that would help them make more money. Alternatively it was like a private equity buy. They thought they could buy it, hold for a few years, and then flip it for a big markup.
In reality, you could argue that 2017 was something like the top of the market for many firms in the broker industry, at least for Europe. The sector had just had a long track record of growth, but that was about to get slowed down, partly by regulatory restrictions and also because the market had become extremely saturated.
The figures released today suggest that Mandatum will get back approximately $350m. Considering Sampo paid about $310m almost a decade ago, those are not great returns.
It has been clear for a while that both Sampo and Geely wanted to exit. Sampo probably because it just wanted to get out of what had become a bad investment. Geely’s owner said last year that the firm needed to consolidate and not “blindly expand”.
The interesting question is why J Safra Sarasin wanted to buy Saxo Bank. JSS runs an asset management and private banking business in Switzerland. They paid just shy of 12x earnings, based on Saxo’s latest set of results.
That is obviously not a crazy amount but it is more than any of the London-listed firms are currently trading at. However, you also have to remember they only bought 70% of the company. It’s plausible they’ll buy the remainder at a cheaper rate down the line.
Acquisitions like this often lead to talk of ‘synergies’ and this is what JSS said it would accrue from the deal. For example, it says it will use Saxo’s technology internally and tap into its network of wealth managers to develop the broker’s B2B business. I think this is could happen but I don’t see it being something that will grow revenues massively for the group.
The other option that you could see from the outside is JSS selling its funds into Saxo’s clients and/or providing them with some kind of advisory service.
The problem with that is that their products seem to mainly be for professional investors and it’s unlikely that a sizeable proportion of Saxo’s clients would meet that description. Plus, even if they were all professional, how realistic is it that they would divert all their funds into JSS funds?
To give a different example, Aberdeen acquired UK stockbroker Interactive Investor in 2022 and you don’t get the impression it was successful in doing anything like that – at least thus far.
My view is that there are probably a few factors at play.
Firstly, JSS sees some growth opportunity in Saxo and thought the valuation justified that. The company doesn’t have to grow that much for it to be a good investment.
Secondly, Kim Fournais, Saxo’s Co-Founder and the other, remaining shareholder, is touching 60. JSS is the majority shareholder now and is in a better position to steer the company in the direction it wants. As Fournais gets older, he will probably be less and less bothered about getting some awesome exit deal. As a result, it’s plausible that JSS could buy him out at a better valuation down the line.
Thirdly, there is unlikely to be any pressure to flip the company or juice it for a higher valuation. Safra is part of a wider, family-owned banking group. Unless there is a drastic change, the company isn’t going to go public. Consequently, they are probably happy to just keep the business growing a bit and take cash out of it.
Ultimately the deal points to a problem we’ve looked at before a few times on TradeInformer. Being a private owner of brokerage business is great. Being a public investor is usually not so great because growth opportunities are limited.
If you are a large investment business (or car maker), that means the actual impact on your overall portfolio is going to be limited.
JSS is a better owner as a result. They are family owned and, kind of like the owners of Spreadex, are probably happy to just see a steady stream of income that grows a bit over the years.