Capital News

DWS GmbH & Co. KGaA: A not so perfect start on the stock exchange

According to press reports, Deutsche Bank expected to receive about 2.0 bn Euro in return for the sale of 25% of the equity of DWS GmbH & Co. KGaA. Instead, it got 1.4 bn and sold 22.25% at a price of 32.50 Euro per share. What is more, it did not take long until the share price fell below the issue price.

So what is wrong with DWS? Definitively not the operating business, which seems to be getting along fine. But there seems to be some confusion in the market regarding the legal structure. DWS is a KGaA, which is a hybrid construction combining the structure of a private limited partnership with elements of a joint stock corporation. Since it is a private partnership, the legal structure of KGaA-shares can be constructed flexible. Theoretically, it would even be possible to grant investors governance rights similar to the position of owners of shares in a joint stock corporation. But for practical matters, more often the KGaA structure is simply used to bypass important corporate governance rights of investors.

Unfortunately, marketing and research people tend to shorten messages. “Well, it may not be a share in a joint stock corporation, but it still is a share in something and you can trade it like a share, can´t you? So just call it a share and it is easy to sell.” Looks like clever marketing at first glance – just don´t tell compliance about it.

<more> "DWS - The silk road is what you make of it" - Buhlmann's Corner

Deutsche Börse: Questionable remuneration to its former CEO

According to the recently released annual report for the year 2017, the former CEO Karsten Kengeter received in return for his investment of 4.5m Euro in Deutsche Börse shares under the terms of the Co-Performance Investment Plan of Deutsche Börse AG 68,987 so-called co-performance shares in the company. Unfortunately, it looks like this investment caused the prosecutors to start an investigation as regards a suspected insider trading.

After all, the reputation loss Deutsche Börse suffered from this transaction is high. In addition, it is still unclear what the economical and other consequences for Deutsche Börse are. But at least the supervisory board will be monitoring “further developments of the investigation against Mr. Kengeter for alleged insider trading and will take any such developments into consideration (if necessary) for further decisions”. The report also informs that the company recognized a provision of approx. 7.5m Euro as a pro-rated entitlement for Mr. Kengeter in this regard.

Vonovia launches public offer for BUWOG shares

Vonovia published the offer document for its voluntary public takeover offer to acquire all shares of BUWOG. The offer, which is supported by the management board and the supervisory board of BUWOG, provides for a cash consideration of EUR 29.05 per BUWOG share, while the holders of BUWOG convertible bonds may receive EUR 115,753.65 in cash for each convertible bond with a nominal value of EUR 100,000 during the acceptance period from Feb. 5^th, 2018 through March 12, 2018.

The completion of the takeover offer, which shall be financed via debt capital, is subject to reaching the mandatory minimum acceptance threshold of at least 50% plus one share of all BUWOG shares at the time of expiry of the acceptance period on 12 March 2018. With this transaction, VONOVIA intends to create advantages for shareholders and tenants via the combination of its residential portfolio of approx. 350,000 apartments with that of BUWOG (49,000 apartments).

Uniper: Fortum offer falls short of majority control

With only 0.47 percent of Uniper shares tendered on top of the 46.65 percent stake already acquired from E.ON, Fortums´ initiative to gain majority control of Uniper via a public take over offer failed. However, the transaction makes Fortum the largest shareholder in Uniper, once the deal closes later in the year. The transaction is still subject to regulatory and competition approvals.

Uniper`s interpretation that capital market participants believe in its strategy as an independent company may be correct. But will it really matter in the mid-term perspective?

Uniper: Shareholders hesitate to tender their shares

Fortum announced that during the initial acceptance period of its voluntary public takeover offer for the outstanding shares of Uniper 171,736,647 shares have been tendered. This corresponds to approximately 46,93% of the share capital of Uniper. The initial acceptance period ended on January 16^th, 2018.

Shareholders still may tender their shares during the additional acceptance period, which runs until February 2^nd, 2018. Fortum expects to report the total amount of shares tendered on February 7^th, 2018, and to finalize the transaction, which is still subject to competition and regulatory approval, in mid-2018.

It should be noted that the reported number of shares tendered probably includes shares owned by E.ON, which held approx. 47 percent of Uniper.

Steinhoff International: When bankers talk too much…

Until it becomes really bad, the publicly known impact of corporate governance issues is typically limited to the shareholders. However, the recent earnings releases of U.S. banks provided a seldom exception from this rule. According to a Bloomberg article, Bank of America suffered from a USD 292m single-name non-US commercial charge-off in the fourth quarter. The article indicates that the bank got stung providing a margin loan that used Steinhoff´s shares as collateral.

Also, JPMorgan Chase acknowledged that Steinhoff was the cause of a USD 143m mark-to-market loss as well as USD 130m credit costs according to the article. Citibank declined to provide more details about a client event except for that it triggered a derivative loss of USD 130m and was responsible for roughly 90 percent of credit losses of USD 267m, but according to the article a person briefed on the results indicated that this was Steinhoff.

Interesting. I thought banks should not comment on individual customers. So where does all this information come from? In any case this type of news is not helpful for Steinhoff, but it helps to reduce concerns with the banks´ shareholders. However, compliance might not to be the strongest competency of these banks. Does anybody remember the causa Kirch?

Wirecard: Just another short attack?

Here comes the next super intelligence report, this time launched by the “Southern Investigative Reporting Foundation”. This publication caused a temporary dip in the shares of Wirecard by more than 10 percent – faster than most people could even read the text. Although, this is easy to read stuff, and the news content is relatively limited. Accordingly, this was more a “story” for those not familiar with the company and its history.

Conclusion: With all its complexity, Wirecard is a difficult to understand business. Investors should pay attention to what´s going on, particularly when it gets to the effects on the accounting level. If you don´t know what´s going on, you better just leave the shares (better even, investments in securities at all) alone.

Biotest AG: Sale of U.S. assets paved the way for the approval of the takeover by the Chinese Creat Group

Biotech AG announced that with the trade approval by the U.S. Committee on Foreign Investment in the United States (CFIUS) the last remaining condition has been met for the takeover offer by Tiancheng (Germany) Pharmaceutical Holdings AG, an acquisition vehicle of the Chinese Creat Group Corporation. Accordingly, the unsolicited takeover bid announced on May 18^th, 2017, for the shares of Biotest AG became effective. The bid valued the outstanding ordinary shares at EUR 28.50 per share tendered, while holders of the so-called preferred shares without voting rights will receive EUR 19.00 per share tendered.

The approval is linked to the signing of a sale of the U.S. entities of Biotest. Until the sale closes, these assets have been transferred to a U.S. trust and qualify as discontinued businesses.