Nobel Industries AB

1863–1993

Nobel Industries AB is one of Europe's leading manufacturers of specialty industrial chemicals, paints, and adhesives. The company has 300 diverse subsidiaries and allied companies under its umbrella, operating in six major categories. Seventy-seven percent of its sales are in markets outside Sweden. Nobel is a world leader in the field of pulp and paper chemicals, mainly through its subsidiary, Eka Nobel AB. This company manufactures chlorine and alkaline products and other special chemicals for the wet-end section of paper manufacturing as well as chemicals for use in the detergent and cleaning product industries, with plants in 12 countries outside Sweden. Nobel Industries' biotechnology division develops and manufactures titanium devices, primarily implants for dental reconstructions. Its major markets are in the United States, Europe, and Japan. In the area of paints and adhesives, Nobel Industries is one of Europe's foremost manufacturers, with market strongholds in Great Britain, Ireland, Belgium, Greece, and Scandinavia. Nobel Industries is also a European leader in the manufacture of industrial coatings. The company's surface chemistry division manufactures and markets ethylene oxide, ethanol and ethylene amines, and cellulose derivatives for applications in surface and colloid chemistry, with major markets in the detergent and cleaning industries. Nobel Industries also operates a pharma-chemicals division, which manufactures fine chemicals used in sun screens, vitamins, pigments, and X-ray contrast agents, and therapeutic chemicals used in the treatment of cardiovascular disease, and gastric, intestinal, and central nervous system disorders. Nobel Industries also included a consumer goods division, making skin care, hair care, and other personal hygiene products, until January of 1992, when this area was divested to Henkel, a German chemical company. Nobel had also long been involved in the armaments business, but the company divested itself of all its defense industry areas by March 1993. One further significant area of operation is Nobel Industries' 87 percent share in Spectra-Physics AB, a company specializing in high-tech measurement using laser, microwave, and infrared technologies.

Nobel Industries was created in 1984 by the merger of a chemical company, KemaNobel, and an armaments maker, Bofors. Both Bofors and KemaNobel had historic ties to Alfred Nobel, the great 19th century Swedish inventor who was the first to discover a way to detonate the flammable liquid nitroglycerin. After inventing the blasting cap in 1863, Nobel founded a company called Nitroglycerin Ltd. the following year and began travelling to set up nitroglycerin plants in Europe and America. He typically exchanged his patent rights for a share in the business, and a network of companies grew bearing the Nobel name. Problems with transport and storage of nitroglycerin caused several deadly accidents over the next few years, until Nobel's 1867 development of the explosive he named dynamite. With the invention of this stable package of nitroglycerine, Nobel's businesses expanded rapidly, and he soon garnered one of Europe's largest fortunes through dividends of his plants in the United States, Britain, Norway, France, Italy, Spain, Finland, Scotland, Austria-Hungary, and elsewhere.

Alfred Nobel died in 1895, having directed that his fortune be used to establish the awards that bear his name. His first company, Nitroglycerin Ltd., continued in the explosives business. In 1965 the company's name was changed to Nitro Nobel, and in 1978 the business was acquired by Swedish industrialist Marcus Wallenberg, who headed a group of companies that included Sweden's largest bank, major airline, leading telecommunications company, a major forest products company, the well-known household appliance maker Electrolux, and the country's second largest auto company. These holdings, controlled directly or indirectly by Wallenberg, were said to account for 25 percent of Sweden's gross domestic product. Wallenberg merged Nitro Nobel with his KemaNord group, and renamed the company KemaNobel.

Bofors, the second company involved in the formation of Nobel Industries, traced its lineage back to 1646, when it was a hammer forge near Karlskoga, Sweden, that by 1894 had become a munitions factory. Alfred Nobel bought Bofors that year, his last acquisition before his death in 1895. Bofors became well known for its howitzer, first sold in 1936. This gun was instrumental to the defense of Britain in World War II. Bofors' subsequent anti-aircraft weapon, the L/70 40mm gun, had strong sales in NATO countries after the war. The RBS 70 anti-aircraft missile was another of Bofors' popular export weapons, along with its 155mm FH 77 mobile howitzer. Because Sweden is a neutral country, Bofors' weapons followed Swedish specifications that they be primarily defensive, and exports were limited by complex government policies. By the mid-1970s about 55 percent of Bofors' weapons and ammunition output went to supply the Swedish defense forces, but that figure declined over the next decade.

Dwarfing these sales however was Bofors' contract to provide $1.3 billion worth of 155mm howitzers to India in 1986.

1976–1989

Government contracts for armaments made up most of Bofors' profits, but the company had interests in other areas as well. These included a chemicals and plastics division called Bofors Nobel, which specialized in manufacturing chemicals that other companies found too messy to make themselves. Strict pollution laws made many firms unwilling to handle the dangerous wastes often produced by chemical manufacture, and Bofors found a growing market for its services, especially in West Germany and Great Britain. Another division, called Nobel Chematur, contracted chemical engineering ventures, mainly explosives factories. Bofors also produced steel tools and truck axles and made diesel engines. By 1976, however, the company had decided to expand its chemistry areas and divest others in order to establish a firm foundation in just two major industries&mdashmaments and chemicals.

Bofors merged with KemaNobel due to the dealings of a canny Swedish financier, Erik Penser. Penser had dropped out of law school in the mid-1960s, preferring to play poker rather than study, according to a Business Week account. He became a broker, then began investing for himself on borrowed money. The Swedish stock market was at a low ebb in the 1970s, but Penser optimistically gambled on a brighter future. The market took a sudden upward swing after a 1982 krona devaluation, and Penser invested his profits in Bofors until he ultimately controlled 40 percent of the company. Next, he set his sights on KemaNobel, the company controlled by Marcus Wallenberg.

Wallenberg, in the meantime, had a lot on his hands. In 1984 he became embroiled in a bitter takeover battle with AB Volvo chairman Pehr G. Gyllenhammar over several major Swedish multinational companies. Penser had already bought up 20 percent of KemaNobel, and while Wallenberg was occupied with Volvo, Penser offered 30 percent above the market price for another 32 percent share of the chemical giant. Wallenberg's investors could not refuse the price. Penser combined KemaNobel with Bofors and named the new entity Nobel Industries. The 42-year old broker now controlled a company with sales of one billion dollars. He installed a friend, Anders Carlberg, as president, while Penser himself moved to England in order to avoid Swedish income taxes.

Nobel Industries expanded rapidly, making many acquisitions. In 1986 the company bought Italian industrial paints company TechnoMax and a Swedish defense electronics firm named Pharos. Nobel also acquired an option to buy Swedish Match, another large chemical company controlled by Marcus Wallenberg. In 1989 the company increased its holdings in its industrial paints division, buying up 60 percent of Italian paint company Colorifico Valtramigna SpA; acquiring a West German adhesives company, Hermanns & Co. GmbH; a Belgian paint company called Trimetal; and the impregnated paper operation of Britain's Catalin. The defense area expanded as well with the acquisition of Philips Elektronikindustrier AB, a defense electronics operation, in addition to the formation of a joint venture with a firm called Telefonaktiebolaget LM Ericsson. Nobel Industries also bought an American electronics company, Automatic Power, an Italian pharmaceutical chemical company, Profarmaco SpA, shares in a British consumer goods company, and several others. Though not all the company's divisions performed equally well, sales and profits were at times stellar. Profits jumped 54 percent between 1986 and 1987, and in a four-month period in 1988 group earnings increased 83 percent. The adhesives and paints division did particularly well at this time, as did the pulp and paper chemicals area.

1984–1992

When Erik Penser formed Nobel Industries in 1984, armaments sold by Bofors accounted for 34 percent of the new company's total sales as well as 39 percent of its operating profits. Three years later, 80 percent of the company's sales and 43 percent of its profits came from paints, adhesives, explosives, plastics, chemicals, and pulp and paper products. This buoyed the company against declining Swedish defense orders and export sales, which were subject to political oversight. Yet Bofors continued to make some key sales, in the mid-1980s providing Pakistan with $102 million worth of missiles, $83 million worth to Norway, and winning contracts to manufacture guns for Indonesian patrol boats. Dwarfing these sales however was Bofors' contract to provide $1.3 billion worth of 155mm howitzers to India in 1986. Scandal swirled around this deal, however. Sweden's Prime Minister Olof Palme had personally lobbied Indian Prime Minister Rajiv Gandhi for Bofors, and when news leaked out of questionable payments to Indian middlemen to cement the agreement, Gandhi's integrity became suspect. Bofors admitted to making payments of $60 million to unspecified agents, but the company claimed this money was "windup costs" paid to its own Indian representatives. Suspicions that Gandhi or people close to him had profited from the Bofors contract dogged the prime minister in his re-election bid, which he lost in 1989. The managing director of Bofors, Martin Ardbo, also lost his job in connection with the India contract and allegations that Bofors was involved in smuggling arms to Iran.

Although Nobel's president, Anders Carlberg, complained to Forbes magazine in 1988 that the Bofors affair was taking too much of his time, the company continued undaunted in its expansion. Earnings in 1988 were four times their level when Nobel Industries was founded, and sales grew 21 percent that year. The company also carried $1.5 billion in debt, but this did not seem to be a cause for concern at the time. After the slew of acquisitions made in 1989, the company went on to purchase the paper chemicals division of British firm Albright & Wilson as well as the bleaching chemicals operations of Stora Kopparbergs Bergslags AB, solidifying Nobel's position as one of Europe's leading producers of chemicals for the pulp and paper industry. The company's consumer goods division paid $107 million to Gillette Company for its European hair and skin care operations, and its Pharos subsidiary acquired an American company, Spectra-Physics Inc., which was the world's leading laser and laser system manufacturer. Renamed Spectra-Physics AB, Pharos also bought a British firm, Continental Microwave. The troubled Bofors unit formed a joint venture company with the Swedish state-owned arms firm FFV. The new company, called Swedish Ordnance-FFV/Bofors AB, controlled virtually all Swedish arms output.

The debt resulting from these acquisitions finally threatened to swamp Nobel in 1991. The company had invested as much as 10 billion krona in 1990, and it was overburdened. On top of this, Nobel had offered an unlimited guarantee to the creditors of a financial service company, Gamlestaden, also owned by Erik Penser. When Gamlestaden failed in the summer of 1991, Nobel could not cover its guarantee. On the verge of financial collapse, Nobel was taken over by the Swedish bank Nordbanken. Penser lost his entire 67 percent holding in Nobel, while trading in Nobel shares was suspended for four days. With Nordbanken as its major shareholder, Nobel recovered, but lost almost $1 billion. To reduce its debt burden, Nobel sold its entire consumer goods division in 1992 to a German chemical group, Henkel. In February of 1992 Nobel divested its 50-percent share of Swedish Ordnance-FFV/Bofors AB, and in March of the following year it sold off its remaining defense electronics business.

The financial crisis had lingering repercussions. As lawsuits involving Gamlestaden dragged on, sales decreased, mainly because of the divestment of the consumer goods division. In addition, the business climate in Europe was dampened by recession, and the Swedish krona was weak. The company prepared for a more difficult time sustaining profitability in the 1990s. But Nobel had a strong industrial foundation, and the company did not expect a repeat of the 1991 fiasco. Rid of its consumer goods and defense divisions, the company had grown more consolidated in its chemical operations. Nobel expected to continue to grow through acquisitions, but to move more cautiously.

Alpinum; NobelTech Systems AB; Berol Nobel Holding AB; Nobel Coatings AB; Casco Nobel Industrial Products AB; Nobel Chemicals International AB; NobelTech Electronics AB; Nettovagen 6 KB; KemaNord Kraft AB; Sicklaverkstader AB; Nobel Koncernservice AB; Spectra-Physics AB (87%); Nobel Finance S.A. (Belgium); Nobel Industries Holding B.V. (Netherlands); Nobel Industries Sweden (UK) Ltd.; Nobel Industries A/S (Denmark); Nobel House S.r.l. (Italy); Nobel Industrier GmbH (Germany).