German Group Secures Stake in Beiersdorf
October 24, 2003
The winning bid led by coffee roaster and retailer Tchibo and the city-state of Hamburg ensures that Beiersdorf, the manufacturer of the massively successful Nivea line of cosmetics and skin creams, will stay in the city, preserving 4,800 jobs. It also puts American multinational Procter & Gamble, which has had its sights on Beiersdorf for months now, out of the bidding.
Going into the deal, Tchibo Holding AG already held 30.1 percent of Beiersdorf. But once the 't's are crossed and the 'i's dotted, the company, owned by Hamburg's Herz family, a local business dynasty, will control 49.9 percent of Beiersdorf.
The city of Hamburg's investment arm, the Hamburger Gesellschaft für Beteiligungsverwaltung, is also purchasing 10 percent of the company.
In recent years, the city experienced a troubling exodus of jobs after major corporations including cigarette-maker Reemtsma, travel and shipping company Hapag-Lloyd, haircare products-maker Hans Schwarzkopf and the Vereins and Westbank AG were aquired by companies outside of Hamburg. In order to avoid a repeat scenario, the city opted to join forces with the Herz family.
The remaining shares will be sold to Beiersdorf as part of a stock buyback program, with Allianz retaining 3.6 percent of the stock. In total, the deal is expected to total €4.4 billion.
High stakes
For weeks, Beiersdorf has been the subject of a high stakes poker game between Tchibo, the city-state of Hamburg, and cast of international players led by Procter and Gamble, L'Oréal, Henkel and Unilever.
Executives at Tchibo told reporters in recent weeks that they feared Procter & Gamble would have merged Beiersdorf with the Darmstadt-based Welle, another beauty products manufacturer, and move its headquarters out of Hamburg.
But by Thursday, Tchibo put an end to the speculation.
"We found a solution that offers avantages for everyone involved," Tchibo CEO Dieter Ammer said, adding that with its clearer shareholder structure, it would now be easier for the company to establish a leading market position. The deal also brings to an end a difficult period of uncertainty for Beiersdorf -- it's now been two years since cash-strapped Allianz announced its intentions to sell its shares in the cosmetics-maker.
Hamburg's Christian Democratic mayor, Ole von Beust, greeted the deal, saying he was pleased that Beiersdorf would remain in the city as a publicly traded, stand-alone company.
"Our further goal is to make Beiersdorf the most valuable company in Hamburg to be traded on the German stock exchange," von Beust said.
Tricky for Hamburg
However, the deal has been tricky for Hamburg, which failed to line up a a state-owned bank to back the deal. The city is heavily in debt, but von Beust sought to assuage tax-payers on Thursday, saying the deal would have no impact on the city's budget during 2003-2004.
"Whether or not it has an impact in the following years depends on economic developments and cannot be determined at this point," the mayor said.
Financially, the move could prove lucrative for the city. However, the deal is still contingent on approval by Germany's Federal Cartel Office.
For more than a decade, Beiersdorf has counted itself among the elite league of top German exporters. Between 1992 and 2002, the sales in the company's Nivea division were explosive, growing from €695 million to €2.63 billion. Other strong Beiersdorf brands augment Nivea's success, bringing the company's total sales last year to €4.7 billion, after tax profits to €290 million and market valuation to over €9 billion.