Siemens AG's aborted attempt to sell Mannesmann Plastics Machinery AG to Apax Partners & Co. Ventures Ltd. may go down in history as the worst plastics industry deal of all time.
For absolute, utter failure, you can't beat these details:
c After announcing the deal in July, London-based Apax emphasized not only that MPM Chairman Wolfgang Vogl would continue as the company's top executive, but that he'd be offered a stake in the firm. Vogl resigned less than three weeks later.
c Three days after the sale was announced, but months before the deal possibly could be consummated, Apax announced it would sell a piece of MPM — Netstal Maschinen AG — to billionaire Swiss businessman Christoph Blocher. Three months later, when Apax backed out of buying MPM, Netstal's fate is cloudy. Will Siemens honor Apax's deal?
c Apax and Siemens lobbied to get fast-track approval for the deal from regulators. But by the time the European Union granted its approval Sept. 17, Apax had cold feet.
c The Apax executive who spearheaded the purchase, Renate Krummer, managing director of the firm's Munich, Germany, office, resigned unexpectedly Sept. 29, and the purchase was falling apart.
There's more. It's clear now that when Apax first sent up a red flag that it was not comfortable with the deal at the terms it had negotiated, Siemens' first reaction was to threaten legal action. The message: No way you're going to walk out of this agreement.
But Apax had the trump card: If threatened with legal action, the company would simply direct the shell company that it had created to buy MPM to declare bankruptcy. No assets, no deal.
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What could Apax and Siemens have done differently? That's tough to say. Both were victims of the economic downturn that started last fall and continues to look bad.
Few investors have cash to spend now, and those that can raise financing are smart to be picky. There are some great companies available right now, and many investors seem to expect fire-sale prices.
Most companies, even solid companies like MPM, aren't worth what they were a year ago. Some cash-strapped, would-be sellers have been holding on to assets for a long time. How much longer can they hold out?
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German businesses used to have a well-deserved reputation for being ultraconservative. MPM's experience in the past few years shows that's no longer the case: The company has been through a hostile takeover (when Vodaphone AirTouch plc made a bid for Mannesmann AG), a joint venture (with Siemens and Robert Bosch GmbH) and now a failed sale.
MPM executives may feel like they've been through the ringer, but they have nothing to fear in the hands of Siemens. They're part of a big German industrial conglomerate again, like they were just a year ago when MPM was part of Mannesmann AG. Yes, MPM is back to being a relatively small fish in a great big pond. Siemens doesn't consider MPM part of its long-term future, but that could change.
Vogl was always the strongest proponent of keeping MPM together — in fact, the reason he left was Apax's quick agreement to sell Netstal. Without Vogl's leadership, Siemens may be tempted to sell MPM piecemeal — but, clearly, not unless it gets the price it wants.