Q&A - Sampo plans to distribute an extra dividend in the form of Nordea shares

Sampo’s Board has today announced that it plans to resolve on the distribution of an extra dividend in its meeting scheduled for 7 August 2019.

The extra dividend would be distributed in the form of Nordea shares so that each shareholder would receive one Nordea share for each ten Sampo shares held. Fractional entitlements to Nordea shares resulting from the distribution ratio would not be distributed in the form of shares, but an equivalent amount would be compensated to shareholders in cash.

Providing that the Board resolves to distribute the extra dividend on 7 August 2019, the ex-dividend date would be 8 August 2019 and the record date would be 9 August 2019. The payment date would be 12 August 2019 for the share dividend and 16 August 2019 for the cash compensation.

Why does Sampo plan to distribute an extra dividend in the form of Nordea shares?

The background for the plan relates purely on Sampo’s solvency. Capital requirements for Sampo’s Nordea ownership has increased due to Nordea’s re-domiciliation from Sweden to Finland. The capital requirements increased in the spring 2019 and will increase further in the beginning of July 2019. The increase in capital requirements has decreased Sampo’s solvency significantly. However, the actual underlying risk related to Nordea ownership has not changed.

If the Board resolves to distribute an extra dividend in the form of Nordea shares, Sampo’s ownership in Nordea would decrease below 20 per cent, which would significantly decrease the capital requirements.

Why did the Board announce that it will plan to resolve on the matter on its meeting in August, instead of resolving on the distribution of an extra dividend now?

Sampo has over 120,000 shareholders. Thus, the distribution is a significant technical operation for different parties. We want to give the banks, the authorities and Euroclear time to prepare so that the distribution would be executed without any technical problems.

Would the decrease in Nordea ownership mean that Sampo’s view on Nordea has changed?

No, it would not. The distribution of an extra dividend in the form of Nordea shares would be purely a technical measure to improve Sampo’s solvency.

Is the planned extra dividend part of Sampo’s dividend policy?

No. The distribution of an extra dividend in the form of Nordea shares would be purely a technical measure to improve Sampo’s solvency.

Why is it important for Sampo to have strong solvency?

Sampo wants to maintain strong solvency to be able to operate more freely in the investment markets and, for example, participate in M&As. Strong solvency also supports Sampo’s ability to pay dividend.

How much would the distribution of an extra dividend in the form of Nordea shares improve Sampo’s solvency?

At the end of March 2019, Sampo’s Solvency ratio according to the Solvency II directive amounted to 126 per cent. Taking the hybrid capital of EUR 500 million issued in May 2019 and the planned distribution of an extra dividend into account, the solvency ratio would have been approximately 169 per cent at the end of March 2019.

Why does not Sampo just sell the equivalent number of Nordea shares?

We believe that there’s much more potential in Nordea. Thus, we don’t want to sell the shares. It would be difficult to sell a position this large and it could send a negative signal to the markets. By distributing the shares as dividend, our shareholders could decide themselves what to do with the shares.

How would the decrease in Nordea ownership below 20 per cent affect Sampo’s financial reporting?

The decrease in Nordea ownership below 20 per cent would affect Sampo’s solvency calculations. In the future, the Group’s solvency would be calculated only by Solvency II directive and Nordea shares would be treated as normal equity investment. The Group’s solvency would no longer be calculated by the conglomerate rules (FICO).

However, the consolidation of Nordea as an associated company in Sampo Group’s financial statement (IFRS) would remain unchanged.

The changes/impacts mentioned above are subject to authorities’ decisions.

Why would Nordea be still treated as an associated company in Sampo’s financial statement?

Solvency II, conglomerate and IFRS rules are independent, separate regulatory frameworks. At the moment, according to the overall assessment, the consolidation of Nordea as an associated company in IFRS statements would remain unchanged. 

How would the distribution of an extra dividend affect Sampo’s results?

Sampo would report a capital gain/loss calculated from the difference between the share dividend and the book value of Nordea share in Sampo’s balance sheet. The gain/loss would not be cashflow-effective.

For example, if the value of the share dividend was EUR 7.00 on the payment date and the book value of Nordea in Sampo’s balance sheet was EUR 8.10 (31 March 2019), Sampo would report a capital loss of EUR 1.10 per distributed Nordea share.

How many Nordea shares would Sampo distribute?

Sampo would distribute approximately 55 million Nordea shares, corresponding 1,4 per cent of Nordea’s total stock. After the distribution, Sampo would hold approximately 19,9 per cent of Nordea.

As a shareholder, do I have to do something in order to receive the extra dividend?

No, you don’t. In order to receive the extra dividend, shareholder would need to hold Sampo share at the end of 7 August 2019 when the Board plans to resolve on the distribution.

I hold less than 10 Sampo shares. Would I receive Nordea shares as dividend?

No, you would not. Fractional entitlements to Nordea shares would be compensated in cash.

I hold 19 Sampo shares. What would be my dividend?

You would receive one Nordea share for the 10 Sampo shares you hold. For the rest 9 shares, the dividend would be compensated in cash.

What would be the value of the cash compensation for fractional entitlements?

The cash compensation would be based on the value of the share dividend, which would be calculated from volume weighted average price of Nordea share on the date when the share dividend is withdrawable, 12 August 2019. If the volume weighted average price of Nordea would, for example, be EUR 7.00 on that day, the value of the cash compensation would be EUR 0.70 (7.00/10).

In order to receive the extra dividend, when should I hold Sampo share at the latest?

The Board plans to resolve on the distribution on 7 August 2019. In order to receive the extra dividend, at least one Sampo share must be held at the end of that day.

I hold shares at the end of 7 August 2019 but I sell them before the dividend is paid. Would I receive the dividend?

Yes.

How would the share dividend be paid?

The share dividend would be paid to the same account in which the shareholder’s Sampo shares are held.

On what stock exchange are the Nordea shares listed?

The shares that are planned to be distributed are listed on Nasdaq Helsinki.

Why is the cash compensation for fractional entitlements to Nordea shares paid later than the share dividend?

The value of the cash compensation is based on the volume weighted average price of Nordea on the payment day on 12 August 2019. The cash compensation cannot be paid before the value of the share dividend is clear.

 

Taxation

The following answers regarding taxation apply to shareholders that are based in Finland. Tax treatment for share dividends received by foreign shareholders are, in principle, taxed in the same way as cash dividends. Since tax practices vary depending on the domicile and the legal status of the shareholder, we kindly recommend our foreign shareholders to turn to their own tax advisors and, if necessary, to the Finnish Tax Administration for questions related to Finnish taxation.

How would the share dividend be taxed?

In Finland, share dividends are taxed in the same way as cash dividends. Because the dividend would be paid in the form of shares, the bank could not collect the withholding tax. Instead, the shareholders must take care of the tax payment by themselves.  

What would be the taxable value of the share dividend?

The taxable value of the share dividend would be calculated based on the volume weighted average price of the Nordea share on the payment date 12 August 2019.

How would the cash compensation for the fractional entitlements to Nordea shares be taxed?

The cash compensation would be taxed in the same way as cash dividends. Also, the withholding tax would be collected in the same way.

Would the share dividend be subject to the Finnish transfer tax?

Yes, the Finnish transfer tax of 1.6 per cent would become payable but Sampo would pay it on behalf of the shareholders. No measures would be required from the shareholders.

Could I sell the Nordea shares I receive as a dividend?

Yes.

If I sold the Nordea shares I received as a dividend, what would be the acquisition price of the share?

The acquisition price of the share would be calculated based on the volume weighted average price of the Nordea share on the payment date 12 August 2019.

If I sold the Nordea shares I received as a dividend, what would be the acquisition time of the shares?

The acquisition time would be the payment date 12 August 2019.

More information and instructions are published closer to the distribution at www.sampo.com. The Finnish Tax Administration will publish more tax instructions later at www.vero.fi/en.