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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 - July 2010




BASF takes over Cognis

Chemicals giant BASF in mid-June agreed with financial investor Permira and the private-equity division of Goldman Sachs to buy the special-chemicals producer Cognis, which BASF will in future incorporate into a separate division of Performance Products. €3.1 billion is what the Ludwigshafen group is paying for Cognis; €700 million in a pure purchase price, and the remaining €2.4 billion in debts and pension obligations. Cognis had been hived off in 2001 by consumer-chemicals maker Henkel, and produces products for the food and health market on the basis of sustainable raw materials, as well as for the cosmetics, laundry and cleansing products industries. Henkel is today still an important customer for Cognis products. Last business year Cognis had a turnover of €2.6 billion. BASF is counting on synergy effects amounting to 5% of the Cognis turnover and integration costs of €200 to 250 million. The takeover should be completed by November.

BayWa will not disclose salaries in future either

The Munich group BayWa will in coming years too not individually disclose the salaries of its board members, as recommended in the Corporate Governance Code. By 96.81%, shareholders voted at the group’s AGM against this transparency rule. BayWa was thus clearly ahead of the 75% needed for such a position to be adopted. Last year the group, operating in the areas of construction, farming and energy, had a turnover of €7.3 billion and paid its five-member board total pay of €5.4 million. Disclosure would interfere too strongly with the private sphere of the board member concerned, was the argument of BayWa management. Shareholder associations criticized the decision.

Gildemeister in the sights of Mori Seiki?

Officially the two machine makers, Germany’s Gildemeister and Japan’s Mori Seiki, have agreed criss-cross holdings of 5% and cooperation in procurement, sales and sales financing. Financial Times Deutschland (FTD) reports that rumours were circulating in the industry that the Japanese could be aiming at a far larger holding. Japanese banks had initially collected options on 20% of the capital of the German lathe and grinding-machine maker. Mori Seiki CEO Masahiko Mori denied this intention.

Is Sistema moving into Infineon?

Russian conglomerate Sistema wanted to come into German chipmaker Infineon at 29%, reported Financial Times Deutschland (FTD). To emphasize this intention, Russia’s president Dmitri Medvedev and ex-president Vladimir Putin asked German Chancellor Angela Merkel (CDU) in late June to exercise her influence on the Dax group, whereupon the chancellery allegedly, according to the FTD, said she was willing to act as a mediator. Infineon has since denied talks with Sistema. In 2006 the firm of Russian billionaire Vladimir Yevtushenkov already unsuccessfully tried to come into Deutsche Telekom. At the time Merkel rejected the deal, since the Bonn group is the most important supplier for government data networks and bug-proof communication.

Siemens in a clinch with Areva

In early 2009 the German conglomerate Siemens unilaterally terminated its joint venture in nuclear power stations with French partner Areva set up in 2001. Since then Siemens CEO Peter Löscher has been negotiating with Russian nuclear group Rosatom on cooperation. Areva, however, sees this as a clear breach of contract, since the contract stated that the Germans could not leave the joint venture before 2012, and additionally could not compete with ex-partner Areva for a year. Now Löscher has called in the European Commission. Brussels is looking into whether this exclusion clause infringes EU antitrust law. The Commission’s decision may certainly take some time, but merely taking on the investigation is evaluated by Löscher as a positive signal. The Munich group originally wanted to seal the partnership with Russians in May 2009.

New remuneration systems non-transparent

Deutsche Bank and Deutsche Börse have had new pay systems approved at their shareholder meetings on 27 May. The bank, however, got only 58% agreement, while even fewer shareholders voted for the stock exchange’s model (53%). This meant that the complex remuneration systems for management had heavy dampers put on them. With the new remuneration model the bank is reacting to criticisms of its success bonuses, said to be too short-term, paid in addition to fixed salary and regarded as one of the causes of the financial crisis, since they tempted financial tricksters into too-high risks. BaFin too therefore called for stricter bonus rules. The more performance- and long-term-oriented financial giants want to make their remuneration, the more complicated the models seem to become. Risk Metrics has already warned of the lack of transparency. The actual remuneration of the Deutsche Bank board members cannot be calculated, despite presentation of the model.

Drugstore company builds up its DOUGLAS holding

Erwin Müller has built up his holding in DOUGLAS HOLDING. The head of the Müller drugstore markets is according to his own statements building up his holding to 5.2%. The billionaire, who with 500 branches has the fourth-largest drugstore market chain in Germany behind Schlecker, Rossmann and DM, came into the perfumery group only last November, at 3%. In an interview with the magazine Focus the businessman additionally thought aloud about stocking up his holding to 18%. Oetker currently has 25.81% in Douglas, and Jörn Kreke has 12.16%.

HeidelCement in the DAX

On 21 June Salzgitter fell out of the DAX because of its too-low market capitalization, and was replaced by HeidelbergCement. The acceptance of the construction-materials producer came on the basis of the fast-entry rule, since by the set date of the end of May the company already took 22nd place in the index ranking for both market capitalization and stock-exchange turnover, Deutsche Börse stated in Frankfurt am Main. The steel group was thus able to keep itself in the leading index for only one and a half years, and will in future be listed, together with Kabel Deutschland and Brenntag, in the MDAX. These bring in sufficient weight and thus replace Pfleiderer and MLP, who will from now on be listed in the SDAX.

Insider trading suspicions against Software employees

Saarbrücken public prosecutors suspect employees of IDS Scheer and Software of insider trading. “We are investigating a total of twelve people,” stated a spokesman for the authority. They are accused of “unprofessional treatment of insider information” in relation to the takeover plans for the Saarbrücken IT company. As early as 26 May, offices of both firms and the homes of those accused were searched, and documents seized. The investigations are not being carried out against the companies themselves.

BGH confirms ban on Springer/ProSiebenSat.1 merger

The Federal Court of Justice (BGH) on 8 June confirmed the ban on the takeover of ProSiebenSat.1 by Axel Springer. Antitrust agency Bundeskartellamt had been right in 2006 to assume that the merger would adversely affect the television competition market. Additionally, ProSiebenSat.1 and Bertelsmann could have become too powerful together, said the antitrust chamber of the BGH in justifying the decision. The two companies at the time of the planned takeover constituted a “market-controlling oligopoly” on the market for television ads, with a market share of over 80%. After the takeover ban, shares were sold in 2007 to KKR and Permira. The publishing house had submitted an appeal on points of law against the 2006 decision and brought the case in front of BGH.