Helsinki and FL Group lock horns over Finnair

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The Finnish government and FL Group, a prominent Icelandic private equity company, are locked in an increasingly bitter dispute over the future of Finnair, the airline.

FL Group has amassed a 22 per cent stake in Finnair, making it the airline’s second-largest shareholder after the Finnish government, which owns 56 per cent.

The Icelandic group has demanded a seat on Finnair’s eight-member board, saying its position as a big shareholder and expertise in the airline industry justifies the appointment.

It has urged the Finnish government to either privatise the airline by selling all its shares or admit that it is a state-owned company and buy the shares it does not own from shareholders.

According to FL Group, the Ministry of Transport has blocked its attempt to join the board, a move described as “morally wrong” by the private equity group.

FL Group has demanded a vote on the issue at Finnair’s March 22 annual meeting.

The dispute between the two captures the tensions that arise as the more aggressive world of private equity encounters the more genteel world of Nordic state-owned capitalism.

The Finnish government regards Finnair as an investment that it holds on behalf of the population of Finland, while FL Group sees it as a value enhancing proposition. “We just want the company we have invested in to perform as well as it can,” said Martin Niclasen, FL Group’s Nordic managing director.

He added that FL Group had invested in several other airlines and understood the industry, meaning it could make a strategic contribution from its position on the board.

The Icelandic company is currently an 8.6 per cent shareholder in AMR, the parent company of American Airlines, and has previously invested in Icelandair, Denmark’s Sterling Airlines and EasyJet of the UK.

A spokesman for the ministry said yesterday that 60 per cent of Finnair’s shareholders had already voted in favour of keeping the existing board in place.

But he admitted this vote represented the government’s 56 per cent plus 4 per cent from other shareholders.

FL Group’s demand for a shareholder vote on March 22 stands no chance of success, given the government’s controlling stake.

However, if a significant number of the remaining shareholders back the Icelandic group, it will be difficult for the Finnish government to go against shareholders’ interests.

Mr Niclasen would not comment on whether FL Group was prepared to go to court over the issue,
but did say selling its entire stake in Finnair was a possibility if no agreement was reached.

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