In line with other European and US markets, the Finnish capital markets have experienced a fairly rapid slow-down during the past year. Heavily dependent on the technology and telecommunications sectors, the aggregate market capitalization of companies listed on the Helsinki Exchanges has decreased significantly, with the main index of the Helsinki Exchanges dropping some 4,400 points from around 11,200 points to 6,800 points during a period of 12 months. Just a couple of months earlier, the HEX index had reached an all-time high on May 18 2000 at 18,331 points.
There are at present 178 different share series listed on the Helsinki Exchanges, while the number of initial public offerings (IPOs) and secondary offerings has decreased dramatically during 2001. The last IPO of 2000 was the global offering and listing on the Helsinki Exchanges of a leading internet security provider, SSH Communications Security in December 2000. So far the only Finnish IPO of 2001 has been Outokumpu Steel's euro 500 million ($451 million) public exchange offer to the shareholders of the Swedish Avesta Sheffield and the listing of the newly created AvestaPolarit on the Helsinki and Stockholm stock exchanges. This deal created the world's second largest stainless steel producer in terms of slab melting capacity, with a market capitalization of approximately euro 1.1 billion. The most important secondary offering during 2001 has undoubtedly been the euro 280 million global offering of Metsä-Serla's (at present M-real) B-series shares. The deal was the largest equity offering by a Finnish issuer since 1999.
Parallel with the slow-down of the Finnish equity capital markets since the spring of 2000, there has been increasing activity on the debt capital markets. For example, a leading Nordic chemicals company Neste Chemicals International (at present Dynea International) introduced a euro 290 million global offering of high-yield debt (under Rule 144A). The deal was the first international high-yield bond issue by a Finnish issuer. Furthermore, in August 2001 the leading publishing and media house Sanoma-WSOY issued a euro 250 million capital note convertible into the company's B-series shares from January 2002 onwards.
In addition, the number of public tender offers has increased significantly during the last six months. The largest and undoubtedly the most interesting deal has been the euro 2.6 billion exchange and cash offer by Sampo to the shareholders of the Norwegian Storebrand, a deal that was never closed, since Sampo decided to abort the offer in early October this year. The public tender offer to acquire shares in Storebrand followed fairly quickly after the euro 5.5 billion two-step three-party merger between Sampo, Leonia Bank and Mandatum Bank, creating the second largest financial institution in Finland just behind the Nordic number one Nordea.
Other public takeover deals during 2001 include the euro 900 million public takeover bid by Pool Acquisition Holding (BC Partners) to the shareholders of the HEX-listed manufacturer of outdoor ceramics Sanitec and the mandatory tender offer to the shareholders of Spar Finland by the Swedish Axfood.
A number of contemplated public tender offers have been announced, for example speciality chemicals company Dynea's offer (majority-owned by Industri Kapital) to the shareholders of the HEX-listed Kemira following its euro 1.8 billion acquisition of 56 % of the shares in the company from the Republic of Finland. In addition, E.ON Energie has notified of making a mandatory offer to redeem the shares in HEX-listed energy company Espoon Sähkö having purchased through its subsidiary E.ON Scandinavia 34.1 % of the shares in the company from the City of Espoo. The City of Espoo further has an option to sell to E.ON its remaining 34.1 %.
New financial instruments have also made their way to the Finnish market. Trading in covered warrants commenced on the Helsinki Exchanges in late 2000. At present three issuers including one foreign issuer, Société Générale, the world's largest issuer of covered warrants, have issued and listed warrants on the Helsinki Exchanges under their warrant programmes. In addition, the Helsinki Exchanges has just introduced yet a new type of instrument. An index share (exchange traded fund, or ETF) is a listed unit of an index fund combining the benefits of indexing, such as effective diversification and share trading together with real time market value and availability of efficient trading.