Buy Now Pay Later giant Klarna strides towards $15bn float
Klarna, the buy now, pay later (BNPL) finance giant, is setting up a new British holding company as it clears the path to a stock market flotation that could value it at more than $15bn (£12.1bn).
Sky News has learnt that the Stockholm-based consumer credit provider has informed investors it has kicked off preparatory work ahead of a listing expected to be launched as soon as the first half of next year.
City sources said this weekend that Klarna, which employs about 5,000 people and boasts 150 million customers globally, would be ready to float within months if market conditions were accommodating.
Its founder and chief executive Sebastian Siemiatkowski said in August that three key conditions – becoming established in the US, having a sustainable business model and significant growth potential – for an initial public offering (IPO) had been met.
Third-quarter results to be released on Monday are expected to show continued progress towards annual profitability, according to insiders.
The administrative decision has been taken to reflect the UK’s standing from a legal, regulatory and capital markets perspective, they added.
The incorporation of the new holding company does not, however, mean that Klarna will necessarily decide to float in London.
Many bankers and investors expect it to choose New York to list instead, in what would be perceived as another blow to the City’s prestige following the US listing of ARM Holdings, the chip designer.
In a statement issued to Sky News this weekend, a Klarna spokesman said: “We have initiated a process for a legal entity restructuring to set up a UK holding company as an important early step on a journey towards an eventual IPO.
“This is an administrative change that has been in the works for over 12 months and does not affect anyone’s roles, nor Klarna’s Swedish operations.
“Klarna Holding will continue to be the regulated financial holding company under the direct supervision of the SFSA [Swedish financial regulator] and we will continue to hold a Swedish banking licence.
“This entity would be registered in the UK.”
Klarna boasts 150 million customers globally
Klarna was forced to slash its valuation to $6.7bn (£5.4bn) in a funding round last year, having once been valued at $46bn (£37.2bn) and drawn backing from investors such as SoftBank’s Vision Fund, Sequoia Capital and Mubadala, the Abu Dhabi sovereign wealth fund.
Bankers believe that based on a comparison with New York-listed peer Affirm Holdings, Klarna should attract an IPO valuation of between $15bn and $20bn (£16.1bn).
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The establishment of the British holding company, which requires shareholder approval, is expected to take place shortly.
Klarna’s corporate reorganisation comes as the UK government veers away from a crackdown on the BNPL sector.
Sky News revealed in July that ministers were planning to shelve new legislation to regulate providers such as Klarna, with future rules instead incorporated into a reformed Consumer Credit Act.
Consumer group fury
Consumer campaign groups responded with fury to the decision, which has yet to be announced by the government.
One industry source said they understood that ministers were preparing to hold talks with BNPL providers about agreeing a series of voluntary measures prior to any legislative changes being introduced.
This week, the Financial Conduct Authority said it had secured contract changes for BNPL customers after an explosion in the use of such products.
Research published by the City watchdog showed that 27% of adults – roughly 14m people – had used BNPL at least once in the second half of 2023.
‘Proportionate’ regulation
Klarna has previously declared itself in favour of “proportionate” regulation of the sector.
Earlier this year, it said it was “concerned with the suggestion to copy and paste Consumer Credit Act rules on credit agreements, which are outdated and don’t protect or inform consumers”.
“Quite the opposite, they leave consumers confused and, ironically, push them towards expensive and higher-risk forms of credit.
“With BNPL regulation the government has a golden opportunity to be bold and create new rules to give consumers the right information at the right time so they can make informed decisions.”
In May, Klarna launched what it described as Britain’s first “credit opt-out” product to give consumers greater control of their finances.
It said the idea had been suggested by Andrew Griffith, the City minister, during a meeting with Mr Siemiatkowski.
The co-founders of the Ben & Jerry’s ice cream brand are demanding the brand be given its independence back amid a long-running row with its current UK owner.
Ben Cohen and Jerry Greenfield have written an open letter demanding that it be “released” from its parent firm.
Mr Cohen told Sky News he would give back the money he received in the sale of the business to Unilever in 2000 if it meant the brand could be independent.
Ben & Jerry’s is set to spin off all its ice cream brands under The Magnum Ice Cream Company (TMICC) name in a deal set to be fully completed before the end of the year.
“You’re saying, would I give it back? Absolutely. If we could still have Ben and Jerry’s independent, any day”, he said.
“It seems like the board of Magnum has been Trumpified”, Mr Cohen told Sky News as he protested the “silencing” of Ben & Jerry’s social mission.
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The consumer goods firm Unilever has never enjoyed an easy relationship with Ben & Jerry’s – a brand known for its activism on many political and social issues.
As part of the original merger deal, an independent board was set up to protect the ice cream brand’s mission.
But a series of disputes have followed.
The most high-profile spat came in 2021 when the US brand took the decision not to sell ice cream in Israeli-occupied Palestinian territories on the grounds that sales would be “inconsistent” with its values.
Ben Cohen in London
Unilever responded by selling the business to its licensee in Israel.
The independent board is currently locked in a legal dispute with Unilever, claiming in March that its then-chief executive David Stever was improperly sacked.
Ben Cohen. File pic: AP
For its part, Unilever has always argued that it “reserved primary responsibility for financial and operational decisions” as owners of Ben & Jerry’s.
In another example of the frostiness between them, an ice cream flavour launched in support of Democrat presidential candidate Kamala Harris went down badly in London.
Ben & Jerry’s claimed Unilever had demanded it stop public criticism of Donald Trump.
Mr Cohen was one of seven people arrested during the Senate protest in May
Ben Cohen himself was arrested earlier this year over a protest in support of Gaza during a US Senate hearing.
He and Mr Greenfield intervened in the ownership row as TMICC briefed investors on their plans at a so-called capital markets day. They say the independent board and many consumers and employees “no longer support the trajectory on which it is set”.
Mr Cohen, who is attending the event to protest, said: “Ben & Jerry’s was founded on a simple but radical premise: that our business could thrive and make outstanding products whilst standing up for progressive values.
“We fought to ensure our social justice mission was protected by Unilever when the company was acquired, but over the past several years, this has been eroded, and the company’s voice has been muted.
“We won’t be silent anymore. Authenticity has always been at the very heart of what we do, and stripping this away risks destroying the very value of Ben & Jerry’s. We urge the board and potential investors to rethink the inclusion of Ben & Jerry’s in Magnum’s future makeup and establish a Free Ben & Jerry’s.”
The new ice cream division, which will also comprise other brands such as Wall’s, is based in the Netherlands and will have a primary stock market listing in Amsterdam.
A spokesperson for The Magnum Ice Cream Company told Sky News: “Ben & Jerry’s is a proud part of The Magnum Ice Cream Company and is not for sale.
“We remain committed to Ben & Jerry’s unique three-part mission – product, economic and social – and look forward to building on its success as an iconic, much-loved business.”
Unilever has also been contacted for comment.
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