Hedge funds and Private Equity - PES

DIS
1. Company description
The DIS Deutscher Industrie Service AG is one of the five largest providers on the German
market for temporary employment. Through its specialization in the qualified segment DIS AG is
clearly differentiated from the rest of the market. DIS is based in Duesseldorf and it has 161
branches in 73 cities and 7 300 employees.
The strategy of DIS AG is based on the concentration on the German market, increasing market
share, the provision of qualified personnel services in five clearly separated business divisions
and the performance-oriented remuneration of employees.
2. Economic and social effects
2. 1 Hedge fund description
In 2006 the Swiss recruitment agency group Adecco launched a takeover bid for DIS. The actions
of DIS and Adecco were unusual by German standards. Adecco’s chief executive and
major shareholder Klaus Jacobs acquired a 29% stake in DIS from Dieter Paulmann, former chief
executive of DIS and its main shareholder. Jacobs then made a public offer to buy the other
shareholders’ stakes in the company. The chief executive of DIS, Dieter Scheiff, initially resisted
the takeover. Jacobs won him over by promising to appoint him chief executive of Adecco after
the takeover.
Adecco subsequently acquired 83% of the shares in DIS. In the meantime, two hedge funds had
bought into DIS, Elliott International having acquired a 10% stake and the Liverpool Limited Partnership
a 3% stake. Adecco planned to acquire more than 95% of DIS by squeezing out the remaining
shareholders with a cash settlement. Adecco also intended to delist DIS and to slash
dividends by 80% from the levels of previous years. Delisting would effectively compel shareholders
to sell their stakes in the company since the shares would scarcely be freely negotiable
any more. The hostile dividend policy also served to drive out shareholders.
2.2 Management policies and shareholder activism: stock option
programs, effects on board and CEO´s, management fees,
employee information
At the general meeting of 8 June 2006, DIS wanted its shareholders to take decisions to delist
the company and cut its dividends. Small investors employed stratagems involving the tabling of
numerous motions to ensure that these main items of business could not be discussed on the
day of the meeting. The decisions in question were not taken until the early hours of 9 June,
whereas the general meeting had been scheduled for 8 June. The Higher Regional Court in Düsseldorf
ruled in favour of the litigants who challenged the validity of these decisions, and DIS had
to remain a listed company. At the general meeting, Elliott International managed to secure the
appointment of a ‘special representative’ to examine claims for damages. Allegations were raised
that DIS chief executive Dieter Scheiff and his head of finance, Dominik de Daniel, who also
switched to Adecco, may have divulged trade secrets to DIS’s former competitor. Adecco had
not yet consolidated its position as majority shareholder in the group by means of a control agreement.
DIS commissioned a specialists’ report, which valued the company at €51.82 per share.
The offer made to the minority shareholders amounted to €58.50 per share. On 7 June 2006,
Annex – 21 Case studies
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