STOCKHOLM, April 1 (Reuters) - Sweden and Denmark said on Tuesday they had agreed to merge the two countries’ post offices, creating a company with annual revenues of about $7.5 billion that will eventually be listed.
The merger of the Scandinavian state-controlled post offices in a new company, in which Sweden will own 58.2 percent of the capital, would enable it to boost competitivity “in the face of mounting market challenges”, they said.
The letter of intent was also signed by private equity firm CVC Capital Partners which owns a minority stake in Post Danmark, the Danish post office.
Denmark and CVC capital would own 38.8 percent in the new company and employees would own the remaining 3 percent.
“The logic in the merger is based on the rapid changes that the market is going through. Both the companies today have three common challenges — European deregulation, harder competition and electronic alternatives,” Maud Olofsson, Sweden’s minister for enterprise and energy, said in a statement.
The postal services said they aimed to list the merged company in three to five years.
Postal service providers in the Nordic region have had to adjust to a harsher environment over the past decade as Internet services such as e-mail have dented large swathes of their traditional business.
After years of heavy restructuring at the Swedish post office, which has closed branches and let local retailers such as food stores take charge of some postal services, the company posted a year-on-year rise in earnings last year.
Sweden’s Posten AB, which is one of the country’s biggest companies with more than 30,000 employees, made an operating profit of 2 billion Swedish crowns ($333 million) on sales of 30 billion in 2007, up from 1.4 billion crowns on 28 billion of sales in the previous year.
Posten would pay the Swedish state an extraordinary dividend of 1.4 billion Swedish crowns as part of the agreement.
Post Danmark has annual sales of 11 billion Danish crowns ($2.3 billion), but operating profit dipped to 848 million crowns last year, down 217 million from a record year in 2006.
The Danish state owns 75 percent of Post Danmark, with 22 percent owned by CVC Capital Partners and the remainder by its employees. The company also owns a quarter of Belgium’s postal service, De Post - La Poste.
The merger was expected to result in cost savings of about 1 billion Swedish crowns in areas such as administration and purchases while unspecified “operational and financial synergies” might also be achieved, according to the statement.
The deal must be approved by the Swedish and Danish parliaments ahead of a formal merger slated to take place before the end of the year.
The Swedish government was advised by Goldman Sachs while SEB Enskilda advised Posten AB and Nordea advised Post Danmark. (Reporting by Niklas Pollard; additional reporting by Simon Johnson in Stockholm and Gelu Sulugiuc in Copenhagen; Editing by Paul Bolding)