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Germany's Oldest Listed Stock Goes Overboard

KD Köln Düsseldorfer
KD will likely go private after an extraordinary general meeting on board the "MS Rheinenergie" on Thursday. Source: Picture Alliance

No other German company has been listed on the stock exchange for so long – and without interruption. When the modern-day “Köln-Düsseldorfer Deutsche Rheinschiffahrt AG,” or KD, first introduced its shares to the Cologne trading floor, it was in the same year that 30,000 people assembled at Hambach Castle near Frankfurt, in what is seen by many as Germany’s first democratic movement. It was also in the same year that mourners carried the poet Johann Wolfgang von Goethe to his grave. The year was 1832.

The company started life as the Prussian Rhine Steamboat Company. It was founded in Cologne in 1826, operating steamboats like the “Concordia” and the “Friedrich Wilhelm.” At the time, there was a competitor a bit further up the river: the Düsseldorf Steamboat Company.

While former rivalries and races, which included intentional crashes, were consigned to the history books after the two companies merged in 1853, one thing has remained constant: The stock listing is present to this day, under the securities identification number “828600.” Shares can be bought on the regulated market in Frankfurt, Hamburg and Berlin.

Achim Schloemer, the CEO, has steered the company and its 12 steamers out of the red.

Very soon this will all end. On April 20, an extraordinary general meeting will take place on board the “MS Rheinenergie” – which once carried Pope Benedict XVI – during which a decision will be made about withdrawing the listing from the stock exchange. The plan to take the company private will undoubtedly succeed: The new major shareholder KD River Invest, a subsidiary of River Advice, a Swiss shipping company in Basle, secured 97.32 percent of voting rights last September. The Swiss paid €5.6 million ($6 million) for the company, which is only moderately profitable.

KD Chief Executive Achim Schloemer won’t be shedding any tears over losing the listing. “We can do without expensive general meetings in the future,” the 50-year-old told Handelsblatt. However, he does promise to keep a high level of transparency when it comes to the continued commercial progress of the company. After all, KD will still have access to capital markets, through the issuing of participation certificates.

Mr. Schloemer has headed up KD since August 2016, having previously sat on the company’s supervisory board on behalf of Premicon, a major stockholder based in Munich. He said the reason for not withdrawing the stock exchange listing earlier was because of the huge amount of money such a step entails. “Fortunately, this will now be paid by the Swiss shareholder, not the company,” he said.

The takeover by River Advice, whose founder Robert Straubhaar was himself a manager of KD until 2004, did cause the company some collateral damage. The change of ownership prevents KD benefiting from tax losses being carried forward. This meant that when the offer arrived in 2015, major provisions had to be made for special tax write-offs, pushing annual results €2.1 million into the red.

Mr. Schloemer has since steered the company and its 12 steamers (nine owned, three rented) out of the red – and generated net profits of €0.1 million in 2016. However, he had promised nearly four times that at the beginning of the year. He now hopes this will come to fruition with a year’s delay.

“There is big price competition for day excursion ships.”

Helge Grammerstorf, head of the consultancy firm Sea Consult

Over the years, countless organizations have tried and failed to turn KD into a cash cow. In 1993 an investment trio consisting of the savings bank Sparkasse Düsseldorf, the private bank Bankhaus Sal. Oppenheim and the sparkling wine manufacturer Henkel gave up on their endeavor and passed the company on to WestLB, a former western German state bank based in Düsseldorf. Seven years later, the somewhat neglected shipping company was sold off in bits and pieces. River cruising went to Viking, a competitor, while the majority of the listed business, including regular services and day excursions, went to Premicon.

The Munich-based company injected a large dose of austerity into its purchase, especially with its tax strategy. Ship ownership went to a KD branch in Luxembourg. The ships – although they were still being used exclusively on the German rivers Rhine, Main and Mosel – were kitted out with the cheap flag of Malta. But even in the year before the purchase offer, KD only generated €0.2 million net profits on revenues of €25.7 million. It is true that riverboats have less wear and tear than ocean cruisers, because they are not buffeted by waves or exposed to salt water. However, environmental requirements and the risk of high and low tides tend to diminish returns. “There is also big price competition for day excursion ships,” said Helge Grammerstorf, head of the consultancy firm Sea Consult.

Mr. Schloemer is aiming to polish up the business model for the new owner. While it will be difficult to increase the number of guests on the ships – KD had 1.5 million in 2016 – the chief executive hopes to maximize returns with up-market packages. “KD is not about sausage and potato salad,” is how he explained it to his employees, adding “there will be no more special dishes for pensioners, either.”

KD has also expanded its land attractions for the regular service between Cologne and Mainz. The shipping company now combines river excursions with cogwheel railway trips up the Drachenfels hill (known as “Dragon’s Rock”), cable car tours to a fortress in Koblenz and visits to an aquarium. There are also cocktail evenings on board from 8 o’clock every evening from Cologne – all impressively documented in Rheinzeit, a glossy corporate magazine.

 

Christoph Schlautmann covers companies and markets and focuses also on the logistics and waste management sectors for Handelsblatt. To contact the author: schlautmann@handelsblatt.com

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