VIPsight - June 2011

COMPANIES

Green light for stock-exchange merger

There is now next to nothing in the way of the merger of Deutsche Börse with the New York Stock Exchange (NYSE) Euronext. The U.S. technology exchange Nasdaq OMX, together with the U.S. commodities exchange ICE, withdrew its offer in mid-May on the grounds that the antitrust authorities have not given the merger their approval. The NYSE's shareholders are to agree to the merger on 7 July. Deutsche Börse shareholders have until 13 July to accept the swap offer.

 

Telekom deal shaky?

The acquisition of Deutsche Telekom subsidiary T-Mobile USA by AT&T may fail because of the U.S. regulatory agency in charge of the phone market, FCC, who fear a dominant position held by AT&T. According to FTD, the Bonn firm would get about five billion dollars from a failure.

 

No dividend at Gagfah

Germany's largest listed property company Gagfah remains under attack. The City of Dresden sued the Luxembourg-based company in March because the company is said after the purchase of 48,000 homes to have infringed the first-refusal right for tenants agreed upon with the municipality. The penalty sought by the City amounts to 1.08 billion euros. Gagfah, however, stated the company believes the claims are unfair and unfounded. The company will therefore make no provisions for a threat of damages, according to its investor-relations manager Rene Hoffmann. Only two million euros for legal fees had been set aside. But that is not all: Gagfah Chief William Brennan used insider knowledge in the sale of 4.7 million shares in February, claimed the news magazine Der Spiegel. Gagfah, 60.09 percent of which belongs to U.S. investment fund Fortress, posted first-quarter income after tax of 24.0 million euros. Nevertheless, for the first time since a long time, shareholders are to receive no dividend for the first quarter. Meanwhile, the German fund DWS and Allianz Global Investors have got rid of their Gagfah shares completely.

 

K + S sells fertilizer division

Back in June of 2010, the fertilizer Group K+S put its Compo division, bringing together fertilizer and compost for domestic use as well as professional products for the horticulturalist, up for sale. Now the management has stated that negotiations are in the final stages and should be completed by the end of June. According to Financial Times Deutschland there are two potential buyers still in the race. The purchase price was estimated at 200 million euros. Compo forecasts a turnover of €450 million and EBITDA of €30 million for 2011. About six companies had looked into the division’s books, including private equity firms like Triton and OEP.

 

ThyssenKrupp restructures

The new ThyssenKrupp CEO Heinrich Hiesinger wants to sell off about one-quarter of the large conglomerate as part of a restructuring. Up for sale are the stainless-steel business, the automotive-supplies division and the shipyard Blohm + Voss. If the reconstruction succeeds, Hiesinger can plug the proceeds into the reduction of net debt, which currently stands at 5.8 billion euros. By the end of 2012, the new CEO wants to be finished with the programme. For the stainless-steel sector, with a turnover of 5.9 billion euros, the Group is also considering an IPO.

 

VW steamrollers MAN

In mid-May Germany's largest carmaker built up its equity stake in the commercial-vehicle manufacturer MAN to 30.47 percent. The official tender offer is now due to be presented in late May and run for four weeks. VW said it would offer €95 for the ordinary shares and €60 for the less popular preference shares. Here, BaFin has calculated, the weighted average price for one ordinary share is only €87.23, so that the VW offer is higher than formally required. VW had announced it would first seek a 35 to 40 percent share in MAN. A complete takeover, which would cost around ten billion euros, is not needed in order to combine the two truck makers MAN and its Scandinavian rival Scania as planned. VW holds 71 ​​percent of Scania. The candidate list for the MAN Supervisory Board, which should be chosen at the next general meeting on 27 June, already has three of VW's top executives, who together with Supervisory Board Chairman Piëch and Audi Chairman Rupert Stadler, both of them already on the MAN Supervisory Board and candidates again, would occupy five of the eight seats on the capital side. The approval of antitrust authorities for the merger is still pending. A further hurdle on the MAN side is still the agreement with the Arab state fund IPIC, which took over MAN’s Ferrostaal subsidiary, but now wants to get rid of it again because of the involvement in the MAN bribery scandal.

 

Porsche rewards preference shareholders

The observer might see it as a generous gesture, and it was also announced as such. The ordinary shareholders of Porsche SE, and so the Porsche and Piëch families as well as the State of Qatar, waive profit-sharing in the five-month short fiscal year 2010 to allow the preferred stock a rich dividend at €0.50 per share, a total of €80 million. The annual report had first announced €0.094 for the ordinary shares and €0.10 for the preference shares. That the family shareholders now selflessly give up a distribution has two reasons. First, they would like to thank the non-voting preference shareholders for their loyalty over the past two meager dividend years, especially since the capital increase in April by 65.63 million each of ordinary and preference shares raised the subscribed capital from €175 million to €306.3 million, or the same number of shares, said the group. The proceeds of 4.9 billion euros were invested in debt reduction. Secondly, as a useful side effect, critical shareholders could be "pacified". The corporate-governance expert Christian Strenger, the Deka-Bank and the Norwegian Norges Pension Fund had already applied last year to Stuttgart Regional Court for an order for a special audit. They wanted to screen the severance payments to former Porsche CEO Wendelin Wiedeking and then CFO Holger Härter. Both were responsible for dubious stock-option transactions, which ultimately made Porsche’s takeover battle with VW fail. Wiedeking and Härter received severance payments totaling €62.5 million after they left. Investors are now signalling that they will not pursue the appointment of a special auditor any further, says Porsche.

 

Too low a bid at Demag Cranes

The takeover bid by Terex for Demag Cranes open until 30 June has as expected met with little enthusiasm from investors. By 25 May, just 216,978 shares in the German crane manufacturer had been tendered to the U.S. construction company, corresponding to 1.02 percent of the share capital and voting rights. Terex is offering €41.75 per share. The market, however, is speculating on a higher price, hoping for a counter-offer from the Finnish competitor Konecranes. The share was quoted at over €45 at the end of May.

 

Klatten increases stake in SGL

Susanne Klatten plans to expand her stake in SGL Carbon within the next twelve months to 29 percent. Her investment company SKion had exceeded the threshold of 25 percent at the graphite specialists, and on 11 May held 26.98 percent of the voting rights, the Wiesbadeners announced on 18 May. But there were no takeover plans. Volkswagen, which holds about ten percent of SGL, is currently also not interested in going beyond that threshold.

 

Tognum bidders hold more than one-third

Daimler and Rolls-Royce hold more than one third of the shares in Tognum. On 25 May the buyers held a good 36 percent of the popular engine manufacturer from Lake Constance, as a release on 26 May showed. So they have cracked the lowered minimum acceptance threshold of 30 percent before the time limit of 1 June. Originally, the two bidders had indicated 50 percent. The full synergies of the transaction can, however, be secured only at three quarters. After the initial offering met with resistance and much criticism from Tognum shareholders, the increase in the offer by two euros to €26 per share brought the turning point.