UPDATE: Orkla Offers To Buy Jotun A Shares, Seeks Majority

Norwegian conglomerate Orkla ASA (ORK.OS) Wednesday said that its wholly owned subsidiary Lilleborg AS was seeking a majority stake in paints producer Jotun AS in a potential deal worth up to 5 billion Norwegian krone ($932 million).

Orkla said it was seeking to buy A shares at a price of NOK70,000 a share in cash. If all the A shareholders accept the offer, Orkla's stake in Jotun would be 64% of the share capital and 91% of the voting rights. If all the A shares are tendered, the total purchase price would be NOK5 billion.

Orkla already owns 41,981 A shares and 103,446 B shares in Jotun, equivalent to 42.5% of share capital and 38.2% of the voting rights. An A share in Jotun entitles the holder to 10 times as many votes as a B share.

The company said it has been an active minority shareholder in Jotun for nearly 40 years and wished to take part in the further development of Jotun as a majority shareholder.

Jotun is still in the hands of relatives to its founder Odd Gleditsch. The Gleditsch family today owns 54% of the share capital and about 59% of the votes in Jotun.

Jotun Chairman Odd Gleditsch, a descendant of the founder, told Dow Jones Newswires that the Gleditsch family was intent on being a long-time owner in the company.

"My view is that it is highly unlikely that the bid will succeed," he said, but declined to say why.

The offer is conditional on Orkla acquiring more than 50% of the voting rights in the company. Orkla said it still wants the Gleditsch family to maintain a substantial Jotun stake and to continue close collaboration.

"We believe this is a good offer," said an Orkla spokesman. "It comes to every branch of the family to decide what they want to do with their shares. We hope they will decide to sell to us."

Analyst David Hallden at UBS said the offer might disappoint some investors who had expected Orkla to use its balance sheet to pay out more cash to its shareholders.

"I have been trying to play this down," said the analyst and added that it is positive that Orkla invests in growth instead of increasing dividends.

The acceptance period expires on Sept. 30. Orkla reserves the right to extend this deadline.

At 1239 GMT, Orkla shares were flat at NOK44.31.

-By Katarina Gustafsson, Dow Jones Newswires [phone]; [e-mail]