Deutsche Boerse Leaders Give In To Shareholders

by Ulrika Lomas, for LawAndTax-News.com, Brussels

12 May 2005

A triumph for investors in Deutsche Boerse, angry at their exclusion from the failed bid for London's Stock Exchange, saw Chief Executive Werner Seifert resign, with Chairman Rolf Breuer to leave by the end of the year.

Major shareholders, including a number of hedge funds, were ignored when they criticized the LSE bid as too expensive and strategically misconceived, but after months of pressure which saw concessions from management, including the promise of a 1.5 billion euro cash payout, Seifert and Breuer have had to accept defeat.

The battle included an attempt by Germany's financial regulator, BaFin, to ascertain whether shareholders were acting in concert to influence the actions of the exchange's management and supervisory boards. The state laws of Hesse, under which Deutsche Börse is regulated, stipulate that shareholders holding more than 10% of an organisation's stock are responsible for maintaining its "sound and prudent management".

Although the Seifert and Breuer team has seen major and successful growth for Deutsche Boerse, which now owns both Eurex (jointly with Swiss SWX) and Clearstream, new 'Anglo-Saxon' shareholders didn't accept the German model of corporate governance which gives short shrift to independent shareholders.

Making the best of a bad job, Breuer said: "In the interest of the company we want to put an end to the recent debate with some of our shareholders." Although a further three directors are due to resign before a May 25 AGM, Breuer urged shareholders to now back management. British director Lord Peter Levene resigned from the board late last month after a split in the board about how to handle the rebel shareholders.

Boerse shares rose 2.6% on the news, ending just below a record high. "If you look at the reaction of the stock, Seifert has created more value with the announcement of his resignation than he did with any other corporate action," said Daniel Loeb of shareholder Third Point LLC.

Analysts believe that major shareholders may now opt for a sale of Clearstream and a possible sale of Eurex as well, paving the way for substantial cash payouts.

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