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

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VIPsight International

Article Index

VIPsight - December 2010



Deutsche Bank secures majority at Postbank

Following the expiry of its takeover bid to free shareholders, Deutsche Bank has secured a majority of Deutsche Postbank, the institution announced on 27 November. Altogether, the market leader now holds 51.43% of the Bonn institution, after at least 21.48% of the shares were offered it for the statutory minimum of €25 per share. That means at least 70% of the shareholders, who before the bid held 30.5%. Deutsche Bank will announce the final outcome on 29 November.The takeover would have been €1.7 billion dearer if the Frankfurters had waited with their bid till 2012, when they take over the outstanding 39.5% of Postbank shares from the holding of former group parent Deutsche Post. Making the voluntary offer eliminated the obligation to make a compulsory bid, which after February 2011 would have to be at the €45.5 that Deutsche Bank agreed with Postbank in 2009 for the transfer of Postbank shares. This is the biggest takeover in the German banking sector in the current year. It remains to be seen whether Deutsche Bank will secure the book value of €650 million in its sale of the BHF Bank, planned before the end of the year. Banking house Lampe, belonging to the Dr Oetker group, is said to have left the bid race. The best offer so far had come from LGT. While the Liechtensteiners were interested, it was mainly in the BHF Bank’s private-client business. The Indian Hinduja group and financial investor Apollo are also said to be among the bidders.


Porsche capital increase planned for 2011

The merger of Porsche Automobil Holding SE with Volkswagen announced for the second half of 2011 could be considerably delayed for juridical and fiscal reasons. To the fore is the capital increase at Porsche needed to remove indebtedness, with proceeds on the issue totalling €5 billion, which would have to succeed. Porsche is still under the pressure of €6 billion in commitments. The AGM on 30 November could approve the capital measures. According to CFO Pötsch, additionally, the outline tax conditions for the complex merger are not yet fixed. Moreover, the effects of the actions for damages against Porsche in the US for four billion Euros and the damage claims by various fund companies in Germany on the merger cannot yet be definitively evaluated at the present stage of proceeding. The credit-providing banks had already stated that in the event of a delay they would extend the first tranche of the €8.5 billion line of credit, amounting to €2.5 billion, by four months.


Hochtief versus ACS

It is still unclear whether Spanish construction group Actividades de Construcción y Servicios (ACS) will succeed in its bid to take over DAX-listed Hochtief. ACS already holds just over 30% of Hochtief and is offering eight ACS shares for five Hochtief shares, which corresponds to a lower figure than the stock-exchange price. If the ACS plans succeed, they would bring about the biggest construction group in the Western world, with an annual turnover of €35 billion.

The management and employees at Hochtief are skeptical about the takeover. Allegedly the Spaniards want to take over the healthy firm and fillet it to get themselves out of debt. German Chancellor Angela Merkel accordingly passed a “Lex Hochtief”, demanded by the SPD, i.e. a tightening up of German takeover law, by way of making a definite refusal. Additionally, the Essen firm failed with its application Australia to have its competitor ACS put in a takeover bid not just for Hochtief in Germany but also for Hochtief subsidiary Leighton, in which the Hochtief holding is 54.4%. That would probably have made the takeover effort so expensive that the Spaniards would have had to drop out for financial reasons. After the Australians had refused a decision in first instance, Hochtief is now appealing to the Review Panel. According to media reports, Hochtief is also having fresh thoughts about the IPO of airport subsidiary Concessions, called off last year, the sale of its holding in Aurelis Real Estate, and a capital increase.


VW on an expansion course

VW currently holds 30% of the shares in MAN and 45% of the shares in Scania. VW supervisory board chair Ferdinand Piëch, who, in a personal union, is also a supervisory board member at Porsche and chair of the MAN supervisory board, is allegedly planning for VW to raise its holdings in Swedish lorry subsidiary Scania from the current 45% to 80%. Thereafter, Scania is allegedly to take over MAN as part of a takeover bid. VW would then transfer its 30% holdings in MAN to Scania. The whole thing would be staged as a “merger of equals”. MAN had attempted in vain in 2006 to take over Scania. Piëch is hoping that a merger of the two lorrymakers under the VW umbrella would bring synergies totaling half a billion Euros.

In the meantime, the owning families Porsche and Piëch have agreed to the sale of Porsche Holding in Salzburg, Europe’s biggest private-car dealer, to VW. For €3.3 billion in cash, the Wolfsburgers will incorporate the Austrian family business by 30 September 2011, thus strengthening their own sales activities. The merger of Porsche Automobil Holding SE with Volkswagen, so far scheduled for the second half of 2011, might, however, be delayed. Porsche is at present still burdened by six billion euros of commitments. To get out of debt, a capital increase with proceeds from the issue of some five billion Euros was arranged at the AGM. According to CFO Pötsch, the fiscal conditions for the complex merger are not yet set. Additionally, the effects of the damage suits against Porsche in the US for four billion Euros and the damage claims by various fund companies in Germany on the merger could not yet definitively be evaluated at the present stage of proceedings. The credit-providing banks had stated that they would in the event of delays be prepared to extend the first tranche of the €8.5 billion credit line, amounting to €2.5 billion, due on 30 June 2011, by four months.


K+S will shift to personal shares

Fertilizer and chemicals group K+S is planning to convert its shares from bearer to personal shares. A motion to this effect will be presented to the AGM in May next year, the company indicated in Financial Times Deutschland (FTD). Since in the case of personal shares, the shareholder’s names are in fact recorded in the share register, companies have a detailed picture of their shareholders and can thus see in good time whether investors are showing big holdings. However, the administrative effort and therefore cost of personal shares is considerably higher than for bearer shares. If K+S actually makes the move next year, then half the Dax companies will have personal shares.

Accounting error at Sky Deutschland

On 22 November it was announced that the Federal Institute for Financial Services Oversight (BaFin) had found errors in various accounts from German pay-TV Sky Deutschland. Thus, the annual accounts and group accounts for 31 December 2007, and the situation report and group situation report for the same year and half-yearly financial report and intermediate situation report for the first six months of the business year 2008 of the then Premiere AG, were faulty, stated the Munich group in a press release. Specifically, BaFin was complaining inter alia that subscriber figures had been put too high, payments for purchasing Bundesliga licences not adequately explained, and the firm’s value set too high. As the pay-TV provider stated, BaFin’s findings had for the moment no direct repercussions on the balance sheet. The company rejected the accusations and would have the Bonn watchdogs’ findings tested in court. If the channel, renamed Sky Deutschland in summer 2009, loses, it will have to present new balance sheets for the corresponding periods. It would also be threatened with administrative fines and damage claims from third parties.


Postbank leaves the MDAX

After the expiry of its takeover bid, Deutsche bank holds over 51.5% of Deutsche Postbank. Since additionally Deutsche Post holds 39.5% of Postbank, the free float fell below 10%. Postbank will accordingly soon have to leave the MDAX, the likely replacement being Deutsche Wohnen.


Stratec Biomedical enters the TECDAX

Stratec Biomedical Systems AG, provider of analysis systems for clinical diagnosis and biotechnology, moved into the technology index TECDAX on 19 November 2010, replacing the share of wireless technology provider Smartrac AG. The unscheduled change was made necessary when Smartrac’s free float figure fell below the required ten percent. US financial investor One Equity Partner is in the process of taking over the Amsterdam firm entirely.


Commerzbank saves interest

An agreement with bank rescue fund SoFFin provides that Commerzbank has to pay interest on its State aid totaling €18.2 billion. The provisions state that the Frankfurt bank should pay 9% interest on the government’s silent contribution of €16.4 billion, i.e. some €1.5 billion, as soon as it shows a profit in its Civil Code annual accounts. That was not the case in 2009, and is not likely to be in 2010 either. While Commerzbank’s CEO Martin Blessing stated in mid November that Germany’s second biggest private bank would show a profit on an IFRS basis for 2010 of one billion euros, and thus come back into the profit zone faster than expected, because of write-offs the bank would continue to be recording a loss in its Civil Code final accounts for 2010 too. That means federal Finance Minister Wolfgang Schäuble is once again empty-handed in 2010. Still worse, he has no entitlement to subsequent payment of the €1.5 billion, since the interest expires.

Since this discrepancy is hard to communicate, the Bundestag’s confidential financial-market committee, known as committee 10a, will at the CDU’s request look into the role the SoFFin steering committee played in concluding the agreements for the rescue measures for Commerzbank. The finance-policy spokesman for the CDU/CSU Bundestag group, Leo Dautzenberg, admitted there may have been errors in reaching the agreements. Particularly explosive here were the imposed requirements, for instance, that the bank should separate from its real-estate specialist Eurohypo by 2014, but also that it would have to pay the interest on the government contributions only once it was recording a profit on a Civil Code basis. The Commerzbank CEO stated that he would begin paying back the state aid by 2012 at latest, even if he had to make a capital increase to do so.


HeidelbergCement back in Merckle’s hands

By early November the Merckle family business empire had built its holdings in the Heidelberg group back up to over 25%, thus obtaining a blocking minority. “Particularly in a cyclical industry, a stable, reliable anchor shareholder is an advantage,” said HeidelbergCement CEO Bernd Scheifele, welcoming the commitment by the family holding company. In the economic crisis the Merckle family empire had lowered its HeidelbergCement holdings from a one-time 72% to below 25%. The elder Adolf Merckle commited suicide in the face of the collapse of the family empire. His son has now stated that Merckle was back on a sound footing again, but that no further purchases of shares are planned for the next twelve months.