Hedge funds swarm into Kingspan’s Nordic target

Kingspan’s plan to mop up the shares it does not already own in Nordic Waterproofing, a Swedish-based maker of waterproofing products for roofs and outer layers of buildings, has attracted hedge funds looking to make some money out of the deal.

The Cavan-based insulation giant said last Wednesday that it had increased its interest in Stockholm-listed Nordic Waterproofing from 24 per cent to 30.9 per cent – breaching the 30 per cent level that requires it to make a takeover bid for the group.

Kingspan originally disclosed it had built up a 24 per cent interest in August last year after acquiring blocks of shares from Swedish investment houses Svolder and Swedbank Robur Fonder. The latest chunk of stock was purchased for 160 Swedish krona (€13.34) a piece, an almost 14 per cent premium to where they were trading in the market before the announcement.

Kingspan confirmed at the time that it plans to proceed with a mandatory offer for remaining shares on the market at the same price as the latest acquisition, which would put the equivalent of a €320 million equity valuation on a company that would naturally fold into its fledgling European roofing and waterproofing division.

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However, on Monday it emerged that a hedge fund unit of UK investment house Tetragon Financial Group had built up a 10.4 per cent position in Nordic Waterproofing by way of financial instruments known as contracts for difference (CfDs). It came only days after another UK hedge fund, Samson Rock, had snapped up a 5.4 per cent stake in the company.

Shares in Nordic Waterproofing rose to as high as 163.8 Swedish Krona on Monday – suggesting the market reckons Kingspan may have to pay a little bit extra to take full control of the company.

At the very least the two hedge funds can prevent a squeeze-out of minority investors, allowable under Swedish takeover law once a shareholder holds more than 90 per cent of a company.