Ref: IMD-7-2126

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Reference: IMD-7-2126

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OW Bunker (A): Denmark's biggest IPO Ever

Anand Narasimhan

By Professor Anand NarasimhanAnand Narasimhan, Jens Famgronning, Tino Bendix and Yvonne Wutzler

OW Bunker, founded in 1953, was a Danish marine fuel (“bunker”) company. It was Denmark’s third largest company (measured on revenue) and the world's largest bunker supplier until its collapse on 7 November 2014. Similar to many other commodity traders, OW Bunker’s business model was about buying the physical oil in order to sell at a later stage (“physical distribution”) or to simply act as a broker between the physical supplier and the ship-owner (“re-selling”).

In essence, the business can be characterized as a high volume/high revenue/small margin business, wherefore scale and risk management are key parameters for success. In 2007, 93.5% of the company were acquired by leading Scandinavian private equity company, Altor, and in the following years, the company grew significantly, and sales volume grew nearly 100%, from 15 million ton in 2007 to 29.6 million ton in 2013, at which time an exit was decided upon. When a private sales transaction did not succeed, Altor decided to pursuit an exit through an IPO, which with a Market Cap of about US$ 900 million, became the largest IPO in Denmark in many years.

Learning Objective

  1. Board Composition essentially whether the Board had the proper experience and expertise to handle the complexity of OW Bunker and whether the rising tendency of a more hands on and involved Board, could have changed the outcome.
  2. Cross Country Corporate Governance, and specifically whether good Corporate Governance were followed in the case of OW Bunker and whether the meltdown likely could have been avoided or mitigated under different jurisdictions and corporate governance structures.
  3. Risk management and the role the lack of it played in OW Bunker, lessons learned and models that can be used to manage risks.
  4. The halo effect, which for OW Bunker was evident on different layers: Company itself, where shareholders believed the company would be able to continue its trajectory trend of successful results; Board of Directors, which was described in the press as a “dream team” because of successful careers and a general recognition in the public; Executive Management where the strong charismatic CEO was given too much authority and responsibility, because of his strong character and proven successful track record.
March 28th, 2014 – November 7th, 2014
TypePublished Sources
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Reference: IMD-7-2126

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Reference: IMD-7-2126

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