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Burdarás:”Highest profit in the history of Iceland”

“Highest profit in the history of Iceland” read Saturday’s business headlines. Investment company Burdarás, made a ISK 24,5 billion profit in the first 6 months of 2005. Second quarter profits were ISK 19,9 billion. According to the Morgunbladid this is the highest first half year profit ever reported by an Icelandic company, it also exceeds the record for yearly profits of any Icelandic company. The prior record for the most profit was held by KB Banki, ISK 15,8 billion in 2004. Fifty per cent of Burdarás’ profit is derived from the sale of shipping company Eimskip to Avion Group this spring. The proceeds of the sales of Eimskip amounted to ISK 12,2 billion out of the overall ISK 21.2 billion profits from equities.

The chairman of Avion Group is Magnus Thorsteinsson, a St. Petersburg business partner of Björgólfur Thor Björgólfsson, chairman of Burdarás (see IR, June 17, “Is Russian mafia financing Icelandic expansion abroad?”). Magnús was also a shareholder in Samson investment company of Björgólfur Thor Björgólfsson and his father Björgólfur Gudmundsson, chairman of Landsbanki (see IR, May 31, “Privatization of banks draws heavy fire.”). In May, Magnus sold his shares in Samson to focus on his investments in aviation.

Samson, owns 44.8 per cent of Landsbanki. Landsbanki and subsidiaries in turn hold 45.8 per cent of Burdarás, and the third largest shareholder of Burdarás is Burdarás with 4.0 per cent.

The biggest single holding of Burdarás is in Íslandsbanki. RÚV has claimed that the Björgólfs intend to merge Landsbanki, Íslandsbanki, investment bank Straumur and investment company Burdarás into one company in order to pursue further acquisitions abroad. (See IR, June 10, “Deadlock at Íslandsbanki?”)

Frettabladid points out today that Burdarás has invested ISK 4 billion in Novator, a private company owned by Björgólfur Thor Björgólfsson. Novator, in turn, has invested in telecommunication companies in Eastern Europe as well as Finland. Fréttabladid finds the investment in Novator “strange” since it raises questions about conflict of interest. Many had hoped that with Björgólfur Thor, as chairman of Burdarás, Burdarás would participate directly in such investments. But, to date, Burdarás has not entered into any investments in the emerging markets of Eastern Europe. Burdarás most recent investments are in public companies in Iceland and the Nordic countries. Fréttabladid concludes by claiming that people had not been expecting the publicly traded Burdarás to channel its investments in overseas telcos through a privately held company owned by the chairman.

According to Burdarás’ second quarter presentation, Burdarás has been “considering very interesting projects” and it is “advantageous for Burdarás to be involved in the fund [Novator] and have the opportunity to join in individual projects”. Last week the Icelandic media reported the purchase of a private jet, which according to RÚV, was purchased by Björgólfur Thor Björgólfsson and will be funded by him and Novator for use by Björgólfur Thor Björgólfsson.

In a recent interview with the Danish daily Berlingske Tidende, Björgólfur Thor denied allegations of involvement with Russian mafia. He also told a reporter from the Danish daily newspaper, Berlingske Tidende that “he and Jón Ásgeir (CEO of Baugur) moved in different circles and did not associate with one another”. Kristín Jóhannesdóttir sister of Jón Ásgeir Jóhannesson sits on the board of Burdarás (see IR, July 2, “Baugur CEO charged on multiple counts”) .

(See IR, July 14, “Not linked to Russian mafia says Iceland’s first dollar billionaire”. )

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