Active ownership

Value creation through active ownership

Industrivärden is an engaged and responsible owner that provides support and makes clear demands, and has a clear owner agenda. The ownership role is based on having significant influence, industrial knowledge, a long-term perspective and financial strength. In Industrivärden the portfolio companies have an owner that actively participates in their corporate governance and strategic development, and that can provide financial support when needed. With its long-term perspective, Industrivärden can support and get behind initiatives in the portfolio companies that entail investments today, but generate substantial value in the longer term.

The formulation and execution of the portfolio companies’ strategies are of major importance for their long-term success. In this respect Industrivärden puts particular emphasis on a number of fundamental principles: distinct leadership, strategic focus, efficiency and operational flexibility, decentralization and financial strength. These qualities strengthen the companies’ ability to conduct and develop their operations in an effective way. At the same time, they increase the companies’ flexibility to act quickly upon market fluctuations, changed customer demands and changes in the world around them. This is especially important in a time of major transitions, where companies are faced with taking advantage of opportunities and reducing risks coupled to, for example, digitalization, electrification and sustainability. Industrivärden’s fundamental view is that the respective portfolio companies will continuously develop their businesses based on their respective preconditions.

Analysis and owner agenda

Industrivärden continuously evaluates the portfolio companies’ respective businesses and operating environments. This work is performed by company teams that are led by a team manager, and employees are normally active on two to three teams. Central areas of the evaluation include strategy, market position, business composition, financial development and capital structure, among others. The analysis is conducted with a broad perspective and encompasses everything from customers, competitors and markets to salient megatrends such as digitalization, new technologies and long-term sustainable development. A keen understanding of these shifts is of major importance for being able to assess the portfolio companies’ long-term value potential as well as the opportunities and challenges they face. In this way, Industrivärden builds up a depth of fact based knowledge about the respective portfolio companies and their business environments. With a starting point in this knowledge, an owner agenda for value creation is continuously updated, which summarizes the strategic value drivers that are considered to be most important for value creation during the coming three to five years. The aim is to identify and describe various opportunities for value growth and strategic measures for realizing this value.

Nominating committee work

The portfolio companies’ boards play a decisive role in the companies’ governance and the appointment of the right CEO. A suitably composed board is crucial. The portfolio companies’ boards must have the combined expertise and experience required to deal with the respective companies’ challenges and opportunities over time. Industrivärden therefore actively participates in the portfolio companies’ nomination processes, where its nominating committee representatives consist of individuals from Industrivärden’s board and executive management. Since access to qualified board members is a key success factor, Industrivärden works actively to identify suitable individuals. The portfolio companies conduct business in a wide range of areas, and therefore Industrivärden continuously maintains a broad network of individuals with expertise and experience in a range of different areas.

Board representation

The individuals on Industrivärden’s board and members of the executive management who also serve as directors on portfolio companies’ boards are considered to have ties to Industrivärden. The owner agendas for the respective portfolio companies are presented on a continuous basis to Industrivärden’s board of directors. In addition, the portfolio companies’ CEOs make business presentations to Industrivärden’s board on a regular basis. In this way the Board of Directors receives a current and good picture of the portfolio companies along with identified measures for value creation. With a starting point in well underpinned analyses,

Industrivärden can gain a hearing for its views and contribute to companies’ development. Through its engagement and long-term presence, Industrivärden establishes close relationships with the portfolio companies’ management teams, board members and board chairs.

Continuous dialogue

On top of its work on the portfolio companies’ nominating committees and boards, Industrivärden is engaged in a continuous dialogue with the companies on a number of important matters, such as strategy, market position, financial development, etc. In addition, Industrivärden presents parts of its owner agendas for the portfolio companies’ CEOs and other senior executives. Industrivärden also attaches great importance to visiting the portfolio companies’ various operations.

Well-suited organization

Against the background of its chosen strategy, Industrivärden conducts its operations in an efficient organization characterized by high flexibility and short decision-making channels. Industrivärden has approximately 15 employees, most of whom are active in the analysis and investment organization. In addition, operations involve eight board members and an extensive network. The organization encompasses a strong base of expertise about the portfolio companies and their respective industries as well as the business environments they work in.

Active ownership: Alleima as example

Greater opportunities for both Sandvik and Alleima

In May 2019 the Sandvik board of directors announced it had decided to initiate an internal separation of the Sandvik Materials Technology business area with the intention to increase the business’s structural independence from the Sandvik Group and thereby put greater focus on its future development possibilities, and create flexibility for improved earnings and higher growth. At the same time, it was also announced that the Sandvik board had decided to investigate the opportunities for a separate stock market listing through distribution of the business to Sandvik’s shareholders.

The company was given the new name Alleima, which is a combination of words “alloy” and “material”, to convey the company’s extensive knowledge in materials technology, metallurgy and alloys along with related industrial processes. The decision to separate Alleima was based on the belief that the company would develop more favorably by itself, have better opportunities for profitable growth, and strengthen focus for both Alleima and the Sandvik Group and thereby increase the potential for long-term value creation for the shareholders.

Industrivärden’s ownership role

As an owner in Sandvik, Industrivärden supported the decision to distribute the Sandvik Materials Technology business area as it is deemed beneficial for both Sandvik and the new company Alleima. On August 31, 2022, Alleima was listed on the Stockholm Stock Exchange (Nasdaq Stockholm), Large Cap segment. After the listing, Industrivärden increased its share of ownership from approximately 14% to approximately 20% and is the company’s main owner.

As an active owner, Industrivärden works long-term to develop and create value in Alleima in accordance with Industrivärden’s business model. In Alleima’s nominating committee, Industrivärden is represented by Fredrik Lundberg (chairman of the nomination committee). The board member Karl Åberg has ties to Industrivärden. In addition, Industrivärden has a close dialogue with Alleima and the other portfolio companies.

Alleima in brief

Alleima is a globally active developer, manufacturer and supplier of high value added products in advanced stainless steels and special alloys as well as products for industrial heating. With close and long-standing customer partnerships, Alleima develops products for the most demanding applications and industries. The company’s offering includes products such as seamless stainless steel tube and pipe for the energy, chemical and aerospace industries, and precision strip steel for compressor valves in refrigerators, air conditioners and heat pumps, and knife and doctor blade steel applications. They also include ultrafine wires for medical devices and micro electronic devices, industrial electric heating technology, and pre-coated steel strips for fuel cells.

Alleima has a fully integrated value chain, including own R&D, two steel mills with smelters, five extrusion presses and several heat treatment, cold finishing and aftertreatment plants. The company’s control of the entire value chain, from research and development to end product, is a key competitive advantage and asset in development of its customer offering.

Alleima’s products play a key role in contributing to the development of technologies – existing as well as emerging ones – to address challenges of the future. This includes products that are enabling the transition to renewable energy, electrification of industries, and innovation in the medical sector.