Crash course

Germany's no. 1 bike-maker hits the wall

Mifa AP
Mifa has run into trouble.
  • Why it matters

    Why it matters

    The bankruptcy of Mifa, Germany’s largest maker of bicycles, could provide entree to the German market for its biggest shareholder, Hero Cycles of India.

  • Facts


    • In 2013, Mifa said it lost more than €13 million, or $16.5 million.
    • Peter Wicht, Mifa’s former chief executive, is facing an investigation into accounting irregularities at the firm.
    • Mifa has been unable to make payments to holders of one of its ‘mittelstand’ bonds.
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Mifa, Germany’s largest manufacturer of bicycles, applied for insolvency under self-administration on Monday amid a criminal probe into accounting irregularities and an ongoing attempt to secure a financial lifeline from a potential Indian investor.

The company, based in the former east German town of Saengerhausen, said its operations would continue during bankruptcy proceedings.

The bike maker had revenue of €100 million. But it faces accounting difficulties, unruly investors, and growing competition from Asian manufacturers.

Its investors included Hero Cycles, a maker of bikes based in India, and German millionaire Carsten Maschmeyer, who has been helping Mifa fend off administration.

The investment plans they agreed upon were not implemented in time and Mifa’s capital ran out at the end of June. Although the German bike maker applied for bankruptcy in Halle, talks were apparently continuing a day later today between Mifa and its shareholders, according to someone familiar with the discussions.

“Despite intensive talks with Hero, we have not been able to find a solution.”

Stefan Weniger, Mifa chief executive

Mifa had been in talks for 16 months with Hero Cycles. The Indian company had an option to invest in Mifa but as of Monday had not exercised it.

The company’s struggles increased after German prosecutors opened a criminal probe into accounting irregularities at Mifa. Inventory holdings were allegedly overvalued, and Peter Wicht, the former Mifa owner and present co-owner, is under investigation.

Amid the troubles, Mifa presented its 2013 financial figures just last week. The firm said it had a loss during the year of more than €13 million, or $16.5 million.

On Monday, Mifa’s share price fell to 78  euro cents. The stock  has lost 84 percent of its value since the start of the year.

Mifa had been unable to make payments on a bond sold to investors. The debt instrument has lost more than 70 percent of its value. Mifa was saved from bankruptcy in April after a cash injection from Mr. Maschmeyer.

After the accounting irregularities became public, Hero Cycles obtained an option to to pay €25 million for 90 percent of Mifa shares, according to Handelsblatt. The agreement was reportedly signed at the start of September.

In August Hero Cycles announced it had acquired a 60% stake worth €15 million in Mifa. Hero Cycles said it had an option to invest an additional €4 million to restructure the bike maker.

But Heroes’ vice chairman Pankaj Munjal told Handelsblatt Global Edition in a telephone interview on Monday that Mifa failed to meet the initial closing conditions for the agreement to take effect.


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“The agreement becomes valid when the closing conditions are met,” Mr. Munjal said.

Hero Cycles said it could not lend money or operational support to Mifa until the conditions, which it didn’t specify, were met.

The agreement set out 18 conditions and four have not been met, Mr. Munjal said. Some of the conditions included convening a bond holders’ meeting and completing negotiations with banks, among others.

On Monday, Mr. Munjal said that if Mifa filed for bankruptcy, Hero Cycles would sever ties to the company. Today, a person with knowledge of the situation said that Hero was still in talks with Mifa, although the focus of the talks, and whether it representated a last-minute bailout of the company, were unclear.

“Despite intensive talks with Hero, we have not been able to find a solution,” said Stefan Weniger, Mifa’s sole chairman of the board, told Handelsblatt.

Mr. Weniger said that while Mifa had applied for insolvency, its order book was full and the firm’s situation was “not without hope.”

Hero Cycles said it hoped to gain know-how from Mifa.

On Wednesday, Mifa will gain a new chairman of the board: Thomas Mayer, who replaces Hans-Peter Barth.

People close to Mifa’s management said Hero Cycles has built a second factory in India. Managers at the German company said the Indian factory uses technology and insights from Mifa.

Hero Cycles said it hoped to gain know-how from Mifa.

On its website, the Indian firm said, “Mifa is a specialist in the mass-market bicycle segment in Europe and has recently made headway in the e-bike segment in Europe, with its ‘Grace’ brand of e-bikes. This acquisition also gives Hero Cycles access to the critical Electronic Drive Unit (EDU) technology, used in e-bikes.”

The German court will now appoint a liquidator to look for investors. Barring this, Mifa’s assets will be sold to repay its debts. A spokesperson for Mifa said the wages and salaries of its 600 employees are guaranteed for three months through the federal employment agency. The bankruptcy will cost German millionaire Mr. Maschmeyer several million euros.

He is considering suing Mifa’s accountants, Rheinische Treuhand, for failing to spot the accounting errors. The news comes at the end of a celebratory period as he has just married Veronica Ferres, a prominent German film actress.


The author is the editor in chief of Handelsblatt Online. To contact the author:

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