Alfa Laval

"After Ruben’s death, several dramatic events occurred. The first was the purchase of Alfa Laval. The deal was linked to liquidity problems for the Wallenberg sphere. In the late 1980s and early 1990s, the group was heavily pressured by attacks from “raiders” such as Sven-Olof Johansson. It was clear to the strategists within the sphere that the construction of shareholdings divided between two separate holding companies, Investor and Providentia, was insufficient protection against attacks. Throughout history, the Wallenberg group had protected itself against hostile takeovers through differential voting shares. However, this was no longer enough. An investor who could mobilize large amounts of capital could theoretically wrest control from the Wallenberg family. The case with Sven-Olof Johansson had been worrying, a newcomer, with the help of borrowed capital, had managed to acquire a “corner position” in Saab-Scania, pushed the stock value sharply upward, and challenged the family’s control."

"In parallel with this, a certain strategic streamlining of the group was carried out. After the purchase of Alfa Laval, there were operations remaining that were not related to processes and systems for processing, packaging, and distribution of liquid food. The decision was made to sell operations focused on processes and systems for solid foods. The operations that produced equipment for milking and milk handling in agriculture had already been spun out to Alfa Laval Agri. In 2000, the name changed from Alfa Laval Agri to DeLaval and would focus on the development, manufacturing, and sales of systems for milk production and animal husbandry."

"Bertil Hagman hastily went to London to discuss the matter with Hans and Gad. After the meeting, they agreed that Tetra Pak would make a bid. Through Jacob Palmstierna, who was about to join Tetra Pak’s board, a signal was sent to Investor’s CEO, Claes Dahlbäck, that Tetra was interested in Alfa Laval. But for Tetra Pak, the contact with Investor was not sufficient, there was another major owner in Alfa Laval, namely the financier Fredrik Lundberg. Tetra Pak was not only interested in buying a part but desired complete control over the company."

"At the same time, Ruben realized that the group would have problems acquiring the necessary capital to finance further development. In his quest for money, he got the idea to let the Wallenberg family buy into Tetra Pak. The same year the company was named Tetra Pak, he thus offered the Wallenberg family to buy half of the shares for one million kronor. Jakob and Marcus Wallenberg thought that Alfa Laval could be a natural collaborative partner and had its CEO, Harry Faulkner, and the board take a closer look at the matter. But when they were done reviewing Tetra Pak, Faulkner informed Ruben that they considered the deal too risky and therefore declined the purchase."

"After IndustriKapital listed Alfa Laval on the stock market in 2002, the Rausing family became the largest shareholders and their share has gradually increased from about 18 percent to 29.1 percent in 2020. The family owns their share through the company Tetra Laval B.V. in the Netherlands. “We will continue to be committed owners as long as we own a significant part of the company,” Jörn Rausing stated in Affärsvärlden in 2012, while emphasizing that the ownership was not a strategic holding for the Tetra Laval group. Both Jörn and Finn Rausing sit on the board of Alfa Laval."

"Less than half a year after Gad’s family purchased the entire group, a restructuring was carried out. The group management was abolished, and the company was divided into three industrial groups, Tetra Pak, Alfa Laval, and Alfa Laval Agri. Within Tetra Pak, the packaging machines and paper remained, while Alfa Laval took care of the engineering operations from “old” Alfa Laval. Agri, finally, handled everything needed to keep and milk cows plus storage equipment for the milk. The division into three independent companies was made to avoid the tensions created by the merger between Tetra Pak and Alfa Laval. It was certainly not easy to merge a family-owned business with a company that had been previously listed on the stock market. It wasn’t long before the former Alfa Laval employees began to call Tetra Pak’s people “tetrapacket”."

"But even though Verghese Kurien succeeded in getting useful products, there was still an important component missing in the plan: Tetra Pak’s machines for the aseptic packaging of milk. Without them, he would never manage to transport the milk the long distance from the rural dairies to the urban consumers. Together with Tetra Pak, Kurien planned for the order of 44 machines that would be delivered in three batches during 1970 and 1971. The necessary laminated paper would be supplied from Sweden until the turn of the year 1971/72. Afterwards, a joint venture would be formed between Tetra Pak, the government-run Indian Dairy Corporation (IDC), and the private Indian packaging company Kant & Co. The newly formed company would start local production of the laminated paper. Alfa Laval would also be involved by providing dairy equipment. The entire deal would cost just over 70 million kronor – money that India could not afford to spend. To solve the tricky financing issue, Tetra Pak brought the matter up with Sida. Thanks to Gunnar Sträng personally backing the project, Sida promised to lend the necessary funds."

"But even though Verghese Kurien succeeded in getting useful products, there was still an important component missing in the plan: Tetra Pak’s machines for the aseptic packaging of milk. Without them, he would never manage to transport the milk the long distance from the rural dairies to the urban consumers. Together with Tetra Pak, Kurien planned for the order of 44 machines that would be delivered in three batches during 1970 and 1971. The necessary laminated paper would be supplied from Sweden until the turn of the year 1971/72. Afterwards, a joint venture would be formed between Tetra Pak, the government-run Indian Dairy Corporation (IDC), and the private Indian packaging company Kant & Co. The newly formed company would start local production of the laminated paper. Alfa Laval would also be involved by providing dairy equipment. The entire deal would cost just over 70 million kronor – money that India could not afford to spend. To solve the tricky financing issue, Tetra Pak brought the matter up with Sida. Thanks to Gunnar Sträng personally backing the project, Sida promised to lend the necessary funds."

"The purchase of Alfa Laval was a stroke of luck, even though Tetra Pak and its owners thought that the price tag was ultimately too high. But once they took over the company, it turned out that it contained so many hidden tax benefits, properties, and other assets that the entire deal could be written off in less than two years. Additionally, Tetra Pak was able to use Alfa Laval’s global network, which meant that the company suddenly managed to close deals that otherwise probably would have been impossible."

"At the same time, Alfa Laval’s operations were refined to heat transfer, fluid separation, and flow management within the areas of energy, marine, food, and water. Thereafter, Alfa Laval was sold to Björn Savén’s private equity firm IndustriKapital. However, Tetra Pak retained a minority stake in the company."

"The day after, the front pages of the newspapers were dominated by the biggest corporate purchase in Swedish history – carried out by a single family. Through the purchase of Alfa Laval, Tetra Pak gained control over the entire production chain from milking to packaging. On January 1, 1993, the two companies merged and a new major corporation, Tetra Laval, was created."

"Historically, engineers have held the power in Swedish industrial companies, focusing on product development and staying at the forefront technologically. That’s how companies like Ericsson, SKF, and Alfa Laval conquered the world. When financial markets became more international in the 1980s and 1990s, demands on listed companies’ profitability increased, and the status of economists was gradually strengthened. The spotlight shifted instead to sales, marketing, and how best to utilize company capital. It was in this environment that the Swedish venture capital market emerged, with role models such as Permira in the UK and KKR and Blackstone in the USA."