Hedge funds and Private Equity - PES

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236 Executives have also been affected by the cost-cutting reorganisation. The plans foresee up to 400 of them losing their jobs, while others are to be demoted or will have to accept reductions in salary. 2.4 Corporate governance and economics Because of pressure from the capital markets – or, to be more precise, investment funds at the last AGM – as well as increasing competition in the airline industry, TUI management is planning to integrate the two airlines (HLF and HLX) into a single brand. The two companies will remain independent legal entities and HLX will deal with marketing while HLF takes responsibility for flying operations. However, it is not yet clear where the employees will fit into the new structure. In addition, the productivity of the aircraft fleet is to be improved, and sales and marketing are to be brought together to cut costs further. As a result of the restructuring there have been a number of personnel changes at management board level in different parts of the company, as well as changes in the supervisory board. 2.5 Management policies and shareholder activism: stock option programs, effects on Board and CEOs, management fees, employee information In October of 2006 several investors wrote an open letter, in which they challenged the chairman of the board Michael Frenzel to split up the TUI group. They wanted management to officially announce a timetable for the split up of the tourism and shipping divisions within the next 6 to 18 months. Furthermore they already discussed their strategy proposal with the head of the supervisory board Jürgen Krumnow. In their meeting with Krumnow the shareholders demanded a stop of acquisitions and the election of new members for the supervisory board, who are experts for shipping and tourism. Author of the open letter is the British asset manager Hermes, who has invested in shares of TUI for the pension funds of British Telecom. Supposedly the British have got the backup of DWS, a subsidiary company of the Deutsche Bank and the leading provider of collective investment schemes in Germany. The step they have taken is a form of escalation in matters of firm-shareholder-relations, that is virtually unheard of in Germany. Usually investors discuss their ideas with the operative management. If they are very displeased, they then seek the publicity of a general meeting to enforce their arguments. The open letter raises the pressure for Frenzel to take action until the next general meeting in May of 2007. Statements several investors have made, seem to indicate, that a significant part of the shareholders will try to force the dismissal of Frenzel, if he doesn’t act as they wish. 2.6 Effects on public finances At the end of 2005, some 16,000 of TUI’s approximately 63,000 employees were employed in Germany. The company is a particularly important employer in Hanover, where it has its headquarters, and in Hamburg, where the head office of its shipping subsidiary Hapag-Lloyd is located. It is extremely likely that breaking it up would have a negative impact on employment in the tourism business – indeed it is questionable whether TUI as a company would survive longterm in its current form, without its second supporting leg of shipping.
The consequences for jobs in Hamburg if Hapag-Lloyd were to be sold are also unclear. There are several possible purchasers, including the Oetker group in Bielefeld, which owns the shipping company Hamburg Süd, and the Danish shipping group AP Møller-Maersk, although the latter company has denied any intention of buying. The TUI group calculates its current tax liability on its consolidated earnings for 2005 at €87 million. TUI AG on its own shows a tax liability of around €10 million in its profit and loss accounts. The consequences for the public finances of a break-up of the company cannot be estimated at this stage – or, to be more precise, they depend on the future location of current operations. References Handelsblatt 11.05.05, p. 25; Wirtschaftswoche 12.05.05, p. 113 f.; Hannoversche Allgemeine Zeitung 02.12.04, p. 11; Frankfurter Allgemeine Zeitung 29.08.05, p. 12;Financial Times Deutschland 04.09.06, p. 17; Börsen-Zeitung 28.09.06, p. 8; finance 10/06, p. 7274; Financial Times Deutschland 16.10.06, p. 1;Börsen-Zeitung 17.10.06, p. 9; HAZ 07.11.06, p. 9; Süddeutsche Zeitung 10.11.06, p. 25; Financial Times Deutschland 10.11.06, p. 8; Börsen-Zeitung 10.11.06, p. 10; Hannoversche Allgemeine Zeitung 14.11.06, p. 9; Börsen-Zeitung 08.12.06, p. 9; Financial Times Deutschland 08.12.06, p. 6; Frankfurter Allgemeine Zeitung 08.12.06, p. 19; Süddeutsche Zeitung 08.12.06, p. 21; Süddeutsche Zeitung 11.12.06, p. 21; Handelsblatt 14.12.06, p. 14; Handelsblatt 14.12.06, p. 13; Frankfurter Allgemeine Zeitung 15.12.06, p. 22; Handelsblatt 15./16.12.06, p. 16; Handelsblatt 16.12.06, p. 18; Börsen-Zeitung 16.12.06, p. 1, p. 11; Frankfurter Allgemeine Zeitung 16.12.06, p. 15; Süddeutsche Zeitung 16./17.12.06, p. 25; Wirtschaftswoche 18.12.06, p. 80-82; Handelsblatt 18.12.06, p. 18; Financial Times Deutschland 18.12.06, p. 6; finance 12/06, p. 66-68; Börsen-Zeitung 11.01.07, p. 11; Süddeutsche Zeitung 15.01.07, p. 19; Financial Times Deutschland 30.01.07, p. 11; www.Frankfurter Allgemeine Zeitung.net 01.02.07, 08:56 bzw. 09:46 Uhr. Annex – 21 Case studies 237
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HEDGE FUNDS AND PRIVATE EQUITY A CR
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FOREWORD Since the 1980s the financ
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At the same time the PES Group took
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84.57 7 447.586 4789.4785 55 7845 4
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12 The need for long-term investmen
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14 1. Hedge funds and private equit
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16 In a very low interest-rate land
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18 The ECB has highlighted this cro
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20 in the sustainable development o
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22 Coherence, co-responsibility and
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24 Transparency in practise Some ar
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26 Ensuring more and better jobs An
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84.57 7 447.586 4789.4785 55 7845 4
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32 The first era of capitalism took
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34 1. Hedge funds In the following
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36 Hedge funds have a structure sim
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38 Hedge funds have flourished in a
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40 The European hedge fund industry
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42 Institutional investors Current
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44 - Funds of hedge funds (FOHFs) i
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46 If we assume US mutual fund indu
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48 the hedge funds themselves would
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50 management fees? It is a fact th
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52 These data notwithstanding, seve
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54 1.11. Tendency of crowding Despi
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56 Theory of money: “In modern ec
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58 Country France Italy Spain Subje
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60 Considering single strategy prod
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62 2. Private Equity Funds Private
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64 Buy-outs are typically majority
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66 2.3 The legal frame The investme
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68 What could you do with 72 billio
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70 And it highlights the comparativ
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72 The figures provide a substantia
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74 2.8 When targeting a company Whe
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76 Domicile of the fund The choice
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78 Specific economic function of Ve
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80 Mortgaging the future to capture
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82 Main conclusions: The total Euro
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84 3. The European response - curre
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86 Article 49 Within the framework
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88 The purpose of this Directive is
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90 As far as the hedge fund and Pri
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92 The following are regarded as se
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94 3. A Member State may entrust ma
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96 Article 93 The Council shall, ac
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98 Primarily, however, society must
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Social Europe versus capital market
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1. Economic viability of private co
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as a rule without any influence fro
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Here is a quite well known “flow
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2. Decent work and workers’ parti
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The pension funds of companies bein
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usiness plan for Kion to employee r
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The combination of increased indebt
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The EU has in the past tried to com
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3.1 The attractiveness of public ut
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fulfilment of public service respon
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The importance of Europe’s transi
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4. Employees, pension fund investme
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unit of Tremont Capital Management)
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contractual issues e.g. Lock-in per
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As many jurisdictions require benef
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Expert Group claims - with striking
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The rising number of hedge funds ap
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time peak in 2005.” It is importa
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Box 2: The Amaranth case (2006) In
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gies, size and age. For instance, i
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Box 3: Complex leverage arrangement
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force a hedge fund to default on it
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Private equity - especially in the
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finance infrastructure through long
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154 But if we in Europe - and hopef
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156 2. Market transparency - a comm
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158 Considering the fact that a lar
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160 Furthermore investment banks ar
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162 3.3 Transparency and supervisio
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164 Recently in most European count
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166 The European Commission should
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168 The EC should also create a fra
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170 4. Private Equity Funds - focus
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172 to create incentives for longer
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174 policy are not being met. This
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176 Acquisitions by private equity
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178 5. Our immediate proposals In t
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180 rules on the disclosure of tota
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182 have rules here and we should p
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Page 189 and 190: AA 1. Company description The Autom
Page 191 and 192: Autoteile Unger 1. Company descript
Page 193 and 194: Bulgarian Telecommunications Compan
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Page 197 and 198: DIS 1. Company description The DIS
Page 199 and 200: DT-Group 1. Company description DT
Page 201 and 202: share alternative. At that time the
Page 203 and 204: Frans Bonhomme 1. Company descripti
Page 205 and 206: Friedrich Grohe AG 1. Company descr
Page 207 and 208: their relations with TPG and CSFB a
Page 209 and 210: Gate Gourmet 1. Company description
Page 211 and 212: ISS Denmark 1. Company description
Page 213 and 214: 2.2 Debt structure, alteration of c
Page 215 and 216: References Süddeutsche Zeitung 09.
Page 217 and 218: 2.3 Management policies and shareho
Page 219 and 220: would have unlocked hidden reserves
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Page 223 and 224: Picard 1. Company description Picar
Page 225 and 226: Stork 1. Company description The in
Page 227 and 228: special members of the board of com
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Page 231 and 232: Telecom Italia Group 1. Company des
Page 233 and 234: 2.3 Management policies and shareho
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Page 239 and 240: 2.4 Corporate governance and econom
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Page 244 and 245: 244 Bond A debt investment with whi
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