Capital News
BAYER AG: Advances in Damage Control open up new Perspectives for Shareholders
The takeover of Monsanto by BAYER can confidently be classified as one of the biggest money burns in the German capital market. With this acquisition, BAYER bought reputation and legal risks, a business model with an operationally weakening business, and limited strategic perspectives in the agricultural business.
But this is only a snapshot. What is more, one can just as well state that BAYER has managed to get at least a part of the purchased problems under control. While the operative business of the Group is still suffering from the consequences of the Monsanto acquisition, there has been positive news from the legal front for the first time in the past few months. For example, BASF´s claim against BAYER in connection with the sale of parts of BAYER´s agricultural business in 2018 was dismissed by the arbitrator. According to rumors at the time, BASF is said to have demanded 1.7 billion EURO plus interest. Even in times when losses for shareholders are inflated by the Monsanto acquisition, this is a considerable amount. In addition, management capacities are relieved by the elimination of this construction site.
All in all, it can be said that the legal risks for BAYER have become clearer. The transparency gained in this way draws more attention to the potential of the operative business. Manageable risks and unused strategic potential in the operative business arouse the interest of active investors. This brings us back to the well-known question: Does it make more sense to break up the conglomerate to raise values in the short term than to wait for a higher level of earnings from the operating business in the medium term? If the current group structure is to be defended, management must at least provide comprehensible evidence that the operative business will be able to produce stronger results in the future, with fewer risks and improved social acceptance.
So, the race has only just begun.
Drägerwerk AG & Co. KGaA: An Era comes to an End
For many years, German issuers used profit-sharing certificates to raise equity without corporate governance rights. Profit-sharing certificates securitize borrowed capital with equity-like features and can be traded like stocks. In the meantime, they have been largely superseded by a new legal construction, the share-like limited partnership shares (KGaA). These constructions are more interesting for issuers because they are considered “real” equity instruments despite severely restricted corporate governance rights.
Drägerwerk was the main remaining issuer of profit-sharing certificates was the main remaining German issuer of profit-sharing certificates outside the financial and media sector. The first issue dates back to 1983. In 2020, the company terminated all outstanding certificates under the terms and conditions. The last tranche was repaid at the beginning of 2023 (nominal), while the dividend-related final payment on these certificates will be made after the AGM 2023.
HELLA GmbH & Co. GmbH KGaA: This is what Vibrations sound like
When you hit a bell, there is a sound. When you hit a company, there is a flow of unexpected news. You can see how this looks like at HELLA.
In mid-December, the owners of the share-like limited partnership shares learned that the Management Board and the Shareholders` Committee of HELLA GmbH & Co. KGaA decided to propose to the AGM 2023, in addition to the distribution of a regular dividend a special dividend in the amount of 2.61 EUR per share. The company intends to distribute to its shareholders, including the holders of the limited partnership shares, the proceeds from the sale of its holding in HBPO Beteiligungsgesellschaft mbH.
This looks like a shareholder friendly initiative, thank you. Unfortunately, just a few days later the company also had to announce that the Shareholders´ Committee has agreed with two members of the Management Board to terminate the management contracts by mutual agreement. This is not the first top level change since the new major shareholder came on board. Are there any other material changes in the pipeline?
Bauer AG: Christmas Capital Increase cancelled at Short Notice
Everything looked so beautiful and the preparations were already well advanced. Probably even the Christmas party was planned down to the last cookie. But as we all know, the devil is in the details.
On November 18th, the Extraordinary General Meeting of BAUER voted to approve a capital increase, paving the way for an increase in the company´s share capital from 26.1 million no-nominal-value bearer shares, by up to 17.4 million new shares, against cash contribution.
The announcement of the capital increase added some reassuring information for shareholders. The main shareholder Doblinger Beteiligung GmbH, which at the time held 30% of shares and voting rights according to the last voting right communication, had declared its willingness in participating in the capital increase to a significant extent. Also, SD Thesaurus GmbH, a company in which Ms. Sabine Doblinger has significant holdings, committed under a subscription and purchase agreement to acquire all new shares that are not subscribed for by other shareholders up to a maximum total of 70 million EUR.
This positive news was accompanied by the additional information that the Executive Board had no information as to whether and to what extent the Bauer family, which at the time held 36.03% of the shares in BAUER AG, would exercise its subscription rights as shareholder in the course of the capital increase.
So far, so good. But on December 19th the unpleasant mess followed. The Executive Board decided to suspend the planned capital increase for the time being. To the company´s knowledge a legal action has been filed with the Munich Regional Court I by a shareholder against the resolution of the Extraordinary General Meeting to increase the company´s share capital against cash contributions. Consequently, the subscription period for the rights issue could not begin as planned on December 22nd and had to be postponed for an as yet indefinite period.
TUI AG: Making a clean Sweep
For a while it looked as if TUI would also perish in the COVID maelstrom. However, these voices underestimated the industriousness of TUI and the depth of the government´s coffers. Meanwhile the worst is over and it is time to come to terms with the past. For TUI this means above all the repatriation of the aid money.
Mid-December, TUI announced that it has concluded an agreement with the German Economic Stabilization Fund (“WSF”) on the repayment of stabilization measures. This agreement regulates the intended termination of the stabilization measures by means of a right of the company to
- Repayment of the contribution made by the WSF as a silent partner in January 2021 (€420 million), and
- Repurchase the warrant-linked bond 2020/2026 issued by the company to WSF (€57.7 million as well as 58,674,899 option rights),
until December 31st, 2023, at a repayment price of €730,113,240, plus interest accruing until repayment under the stabilization measures.
Under the repayment agreement, TUI is also obliged, to the extent permitted by law, to propose to a General Meeting of Shareholders a reduction in the company´s share capital from currently approx. € 1.785 billion to approx. € 179 million by consolidating shares at a ratio of ten to one.
The amount of the reduction of approx. € 1.606 billion will be allocated to the capital reserves and will not be distributed to shareholders. Furthermore, the company is obligated under the repayment agreement, to the extent permitted by law, to use its best efforts to implement a rights issue capital increase from the authorized capital, the proceeds of which shall be used to finance the repayment of the WSF.
The invitation to the Annual General Meeting, including the full agenda and the corresponding resolution proposals, is expected to be published in the German Federal Gazette (Bundesanzeiger) and on the company´s website at the beginning of January 2023.
The measures come much faster than expected. We will therefore keep our fingers crossed that all shareholders already have the funds required available to participate in the capital increase.