Our Sponsors

VIPCoFCCGBroadridgeLink Market Services GmbHAHEADhermesDP DHLK+SSAPGeorgesonSuedzuckerWacker Chemie AGThomson ReutersEQS Group

Search

VIPsight

Corporate Governance – portrayed in the individual cultural and legal framework, from the standpoint of equity capital.

VIPsight is a dynamic photo archive, sorted by nations and dates, by and for those interested in CG from all over the world.

VIPsight offers, every month:
transparent and independent current information / comments / facts and figures on corporate governance locally and internationally,

  • written by local CG experts,
  • selected and structured by the Club of Florence,
  • financed by its initiator VIP and other sponsors with a background of “Equity and Advisory” interests.
     

VIPsight International


Article Index

VIPsight - 1st Quarter 2021

 

COMPANIES

 

adidas AG: First Announcement of a special Sales opportunity

It´s amazing how long athletes can hold a hot potato. adidas acquired Reebok in 2006. It is probably no exaggeration that this is not the most sensible investment of the otherwise successful group. No wonder that soon after the acquisition investors began to dream of separating the two companies, while the management continued to hop for positive value contributions. But at some point, decisions have to be made, and now the time has finally come for Reebok. 15 years after the fact and as part of the development of its new five-year strategy, adidas confirmed that it might sell Reebok in the context of a strategic overhaul of the group. adidas intends to further focus its efforts on further strengthening the position of the adidas brand in the global sporting goods market. Consequently, Reebok will be reported as discontinued operations from the first quarter of 2021 onwards.

According to the adidas CEO, Kaspar Rorsted, Reebok and adidas are expected to be able to significantly better realize their growth potential independently of each other. The Frankfurter Allgemeine Zeitung indicated that JPMorgan was mandated with this transaction, which could generate a consideration of approx. 1 bn EUR. For the historians among our readers, it is perhaps still interesting that adidas paid more than 3 bn EUR 15 years ago.

 

METRO AG: Balance Sheet Supervisor stumbles upon balance sheet supervision

After the hustle and bustle of the past few months, METRO could certainly use a little rest. But just a few weeks after the start of the year, the next corporate governance bomb is bursting. This time, the DPR is responsible for the disaster. However, we are not looking at balance sheets, but rather people. We owe this attention to the current mishap to the METRO supervisory board member Edgar Ernst. Mr. Ernst is joined the supervisory board in 2017, although he already had another hobby: Mr. Edgar Ernst has been President of the German Financial Reporting Enforcement Panel (DPR e. V.) since 2011. Therefore one wonders, did he perhaps just wanted to try out how badly a massive conflict of interest can damage a company´s reputation?

If so, he at least can claim wise foresight, because the DPR doesn´t need this kind of effort anymore since it´s wirecard debacle. But perhaps it´s more than just coincidence that the appearance of Mr. Ernst before the wirecard investigation committee is also the reason why his unusual understanding of business ethics became publicly known. Unfortunately, the relevant rules have been formulated in such a way that it is hard to get them wrong: The President of the DPR and other high-ranking employees are not allowed to accept any new supervisory board mandates from 2016. But even after the issue became publicly known, Mr. Ernst had to ponder for a long time what the regulations mean, until he finally took the necessary consequences and resigned from his position at DPR. Curious observers are now wondering when he will reach the same level of understanding regarding his supervisory mandates.

 

Daimler AG: Preparing for a friendly Divorce

Maybe someone at Daimler recently watched one of these entertaining films about the fate of dinosaurs. This might help to explain why the company decided to go ahead with a fundamental change in its structure, “designed to unlock the full potential of its businesses in a zero-emissions, software-driven future.” A consequence of this plan is the decision to evaluate a spin-off of its Truck and Bus Division and to begin preparations for a separate listing of Daimler Truck. 

The Daimler Truck business shall have fully independent management, stand-alone corporate governance including an independent chairman of the supervisory board, and it is targeted to qualify as a DAX company. A significant majority stake in Daimler Truck shall be distributed to Daimler shareholders. The transaction and the listing of Daimler Truck on the Frankfurt Stock Exchange are expected to be complete before year-end 2021. Also, Daimler intends to rename itself as Mercedes-Benz at the appropriate time.

This type of spin-offs is usually advantageous for shareholders. But there is also the underlying business aspect. The formation of a zero-emissions portfolio can presumably only take place at different speeds in the Truck and Bus and the Mercedes-Benz entities, requiring a separate positioning in the market. Occasionally you just can´t avoid being good.

 

Deutsche Bank AG: The Story Behind the Story

Last week I was invited to join one of Trump´s golf clubs. What would have looked like an honorable offer under other circumstances is now nothing more than an indication of how ailing this business has become since January 6, 2021. Even the Wallstreet Journal reported that the Capitol Riot threatens Trump´s already hurting business.

No love among these two anymore, one might think. Until recently, Deutsche Bank was considered to be one of a few major financial institutions willing to do business with Mr. Trump. But now it looks like the bank is moving to distance itself from the president´s businesses and is unlikely to lend it more money, the WSJ reported. The bank has lent the Trump organization more than 300m USD that will mature in 2023 and 2024. The bank is therefore probably happy that two employees entrusted with the Trump commitment recently left the institution. After all, they are no longer needed, aren´t they? Well, a few weeks later the New York Times informed its readers that Trump´s banker at Deutsche Bank was “permitted to resign” after the bank learned that she was “engaged in undisclosed activities related to a real estate investment, ”including buying a property” from a client-managed entity.”

 

Aareal Bank AG: No Time for Hibernation in Wiesbaden

Occasionally, all signs point to a storm. The discussions between Petrus Advisers and Aareal Bank are such a process. Both sides already stated last year that they do not attach particular importance to the positions of the other side. And why should you do this if one side wants to dissolve the previous business model and the other wants to develop it further? Hence, the detailed explanations presented at the annual press conference of Aareal Bank on February 24th are probably not helpful with a view to ending this dispute.

Aareal´s management should also be aware that optimizing what is already there is no answer to the demand for abolition. But it helps to buy time. Also, it is probably a safe bet that the house was swept clean with the 2020 accounts. This should give the bank some breathing space to tackle urgent problems such as the need to strengthen the management. However, the medium-term perspective remains unchanged. This investor wants to achieve something with Aareal that he is currently not getting. So eventually one party has to move to resolve the conflict.

 

Grenke AG: How to misunderstand a Misunderstanding

For many years, events at Grenke AG were ignored by large parts of the media. This is the sad fate of a company with a persistent stream of good news, which I why many press spokesmen would have gladly taken on this agony. But the quiet days have passed since the investor Frazer Perring set off a firework of allegations.

Until recently, the COO, Mark Kindermann, was also able to enjoy this unusual public attention. Unfortunately, however, there seems to have been misunderstandings in the accounting he oversaw. However, the news of his early resignation on February 8th caught many investors by surprise. What is more, the message about his departure contains a confusing passage: “The preliminary assessments made in the course of the ongoing audits are critical of previous internal processes in the compliance organization and Internal Auditing department. Mr. Kindermann has pointed out to the Supervisory Board that it will be necessary to revise the preliminary assessments once the audits have been completed. Mr. Kindermann decided to resign from his mandates today to avoid any dispute before completing the audit concerning the justification or materiality of these criticisms and to prevent any potential damage therefrom to the Company.”

No wonder that the share price went South. The shareholder´s reaction gave Grenke food for thought too. The result in the form of a statement from the chairman of the supervisory board then reads as follows:

“We have heard your call for more transparency regarding the resignation of our Board of Directs member, Mark Kindermann, loud and clear and would like to respond to it in detail.

In the course of the ongoing audits by KPMG and Mazars, there had already been some qualitative indications and findings regarding the Internal Audit and Compliance organization. The imminent reason for Mark Kindermann´s resignation was BaFin´s criticism of Internal Audit and Compliance processes in the course of the ongoing audits by Mazars.”

See? You can lean back and relax. It´s just the procedures and regulations.