Corporate merger in finance sector

In late May 2002, Norway's two largest financial institutions, DnB and Storebrand, announced their intention to merge to create one of the largest financial services groups in Scandinavia. It is thought that up to 1,000 jobs may be lost as a result.

On 29 May 2002, the two largest financial institutions in Norway, Den norske Bank (DnB) and Storebrand, announced their intention to merge, thereby creating one of the largest financial services groups in Scandinavia. The name of the new group will be DnB Storebrand. The announcement followed two weeks of concentrated negotiations between the two companies, and should be regarded, considering the balance of strength between the two, as a virtual takeover bid by DnB. The merger will, it is estimated, generate financial 'synergies' worth approximately NOK 750 million, mainly achieved through workforce reductions, which means that the equivalent of 750-1,000 jobs will have to go.

DnB, Norway's largest financial services group with around 7,000 employees, is involved in both banking and insurance and is the result of a series of mergers in the sector. DnB is much larger than Storebrand, with approximately 1.8 million active retail customers, and a market share of one-fourth of the total Norwegian corporate market. Storebrand ASA is also the result of a series of mergers and takeovers, mainly within the insurance sector. It has almost 1,300 employees in four independent subcompanies or branches, including banking and insurance.

The merger is conditional on two-thirds majority votes at extraordinary general meetings of shareholders in both DnB and Storebrand to be held in August 2002, and approval by the Ministry of Finance as well as the Norwegian competition authorities. The largest shareholder of DnB, the Government Bank Investment Fund which controls 47.3%, has already given its approval, and the owners of almost half of the shares in Storebrand have also given their consent. There also seems at present to be political support for such a move both in parliament and among the parties in the centre-right coalition government. The government sees the proposed merger as an opportunity to reduce state ownership, although it will still possess around a third of the new company's shares. Furthermore, the government also wants to ensure, through its ownership share, that the company remains in Norwegian hands.

The Finance Sector Union of Norway (Finansforbundet), which organises most of the employees in both companies, fears that the result of the merger will only be short-term gains for a small group of shareholders at the expense of the customers, and significant redundancies. Although it is not yet clear how many employees will be affected by the merger, most estimates suggest that between 700 and 1,000 jobs will be lost. The management of both companies have pledged that personnel reductions will mainly be achieved through early retirement and voluntary schemes. However, following the recent turmoil in the merger process between the Braathens and SAS airlines (NO0111125N and NO0106134N), where it now seems that between 700-1,000 Braathens employees may lose their jobs as a result of cost-saving measures, employees at Storebrand are especially worried about their situation in the event of 'downsizing'. They have thus called for guarantees that all employees will be treated equally in the event of redundancies. They do not want a situation in which the employees of Storebrand, as the smallest company, will have to bear the main brunt of redundancies.