BHF Crisis

Hostile Bid Leaves Bank in Turmoil

BHF bank imago
When two parties quarrel, a third suffers - in this case, it's BHF Bank.
  • Why it matters

    Why it matters

    The Frankfurt-based BHF-Bank, once the largest private bank in Germany, faces heavy damage from a drawn-out takeover battle between its holding company and a Chinese investor.

  • Facts

    Facts

    • Germany’s BHF-Bank dates back to 1884 and rose to prominence in the 1970s, dealing mostly with wealthy private clients.
    • BHF Bank has had four owners in the past 15 years, including the Dutch bank ING, German banks Sal. Oppenheim and Deutsche Bank.
    • Chinese investor Fosun is now trying to wrest control of the bank from its latest owner, RHJ International, which acquired a majority stake in 2014.
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    Audio

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The German banking world has never seen anything quite like it. Over the past few weeks, a genuine, honest-to-goodness hostile takeover battle is keeping the industry on the edge of its seat.

The object of contention is BHF-Bank, a private bank that was once one of the country’s largest. What had started as a bit of light summer entertainment, starring the long-standing Frankfurt-based banking institution, has developed into a veritable drama.

At the center of the months-long standoff is the Fosun, a Chinese investor that has been busy targeting firms across Europe this summer. Fosun is trying to wrest control of BHF-Bank from its parent holding company, BHF Kleinwort Benson.

The struggle has proven to be a severe test of endurance for BHF-Bank, and this at a time when the institution was just getting back on its feet after years of uncertainty over its leadership after suffering four different owners in the past 15 years.

“We have already gone through a lot, but it has never been this bad,” said one insider at the bank.

Anxious customers are threatening to pull out of the bank, while employees are complaining bitterly that the battle is tearing the bank internally apart. Headhunters are making the rounds, hoping to lure away the bank’s best customer consultants with job offers.

“There is a systematic attempt to lure away BHF’s best customer service advisors,” said one Frankfurt-based personnel consultant.

As if their weren’t enough twists and turns in this summer tragedy, a third player has emerged of late. Oddo & Cie, a Parisian bank and already a major shareholder, is considering a counter-takeover offer for the troubled bank.

Insiders worry it may all be too late. “If the dispute doesn’t end soon, then at some point there might not be much left worth fighting over,” said one gloomy banker at BHF-Bank.

“ We have already gone through a lot, but it has never been this bad.”

BHF Bank Employee

Behind the takeover battle is an embittered conflict between two people: the chairman of Chinese conglomerate Fosun International, Guo Guangchang; and the chairman of BHF Kleinwort Benson, Leonhard (Lenny) Fischer, who has spent the last few years painstakingly piecing together a new European banking group with BHF-Bank at its core.

For Mr. Fischer’s holding group, things had just been looking up. In the first half year, the Kleinwort Benson posted a profit for the first time since it merged the group in early 2014. Operative profits of €8 million, or $9 million, were reported for the January-July period.

At the time, Martha Böckenfeld, the chief financial officer of Kleinwort Benson, assured that, so far, there were no tangible outflows to complain about at BHF-Bank, despite the fact that the takeover battle was already ongoing. But it was admittedly too early for that. Many employees now see the successful restructuring of the bank in danger.

“We need a quick decision; otherwise, the bank will suffer massive damage,” said one of them said, who doesn’t expect quick action.

194 BHF Bank-01

 

The fight has been building since July, when BHF-Bank’s supervisory board, which has the power to hire and fire managers and is under Mr. Fischer’s leadership, forced chief executive Björn Robens to leave in an unexpected and sudden move. Mr. Robens was considered to be a close confidante of Mr. Guo, but Mr. Fischer accused him of being highhanded, dealing in dirty tricks and having an autocratic leadership style.

The firing irked Fosun, already a major shareholder, which made it clear it considered Mr. Roben’s sacking to be a flagrant mistake. Mr. Guo then went one step further: He presented a takeover bid for the holding company.

Other major shareholders, including BMW-heir Stefan Quandt and American Franklin Templeton Investments, rejected the offer of €5.10 ($5.74) per share as much too low. Since then, the bank has become ever deeper engulfed in conflict.

A month and a half ago, BHF’s non-executive supervisory board, which has the power to hire and fire managers, launched a special investigation of Mr. Robens. The investigation by international law firm of Frechfields Bruckhaus Deringer is supposed to determine whether the former chief executive was in breach of his official duties, but the results are not yet known, according to sources.

One of the chief accusations is that Mr. Robens, without the knowledge of the executive board or the supervisory board, supposedly wrote a letter on private stationary to a group of investors, including Fosun, in which he pledged BHF-Bank guarantees totaling several millions of euros for their plan to purchase a Munich fashion brand, Bogner.

Bank insiders say the long investigation is spreading a climate of fear that is deeply unsettling many employees. On the other hand, word from the supervisory board is that the facts of the case have to be thoroughly cleared up and that it is not only a matter of legal charges but also a matter of values, like good corporate governance.

Fosun’s effort to take over the company is not popular with all clients. Just recently, it leaked out that the Caritas Verband Limburg, which was about to become a BHF client, backed down at the last minute, supposedly because, in consideration of the condition of human rights in China, it didn’t want to be the customer of a bank that would soon belong to an investor from the People’s Republic.

“The telephones didn’t stop ringing after that,” said one banker at BHF-Bank. Dozens of customers, concerned about the leak, wanted to know whether banking confidentiality still counted for anything at the Frankfurt entrepreneur’s bank.

In any case, the gaining of new customers has come to a standstill since the outbreak of hostilities, and now even the old ones are threatening to leave.

Meanwhile, the competition is trying to take advantage of the bank’s situation.

193 Fosun-01

 

The employees already have had a long period of suffering behind them. For three long years, the bank lay in uncertainty, waiting for the sale by Deutsche Bank to its new owners, the consortium RHJ International that set up Kleinwort Benson. Dutch bank ING and Germany’s Sal. Oppenheim have also owned the bank over the past 15 years.

But a quick decision in the latest takeover battle doesn’t seem likely. Belgium’s financial supervisor is still examining Fosun’s bid, and in the meantime BHF Kleinwort Benson shares, listed on the Brussels’ stock exchange, have climbed to €5.45, well above the price quoted in Fosun’s bid.

Mr. Fischer’s camp is hoping for a knight in shining armor in the shape of major shareholder Oddo & Cie. The managing partner of the Parisian banking institution, Philippe Oddo, is interested in making a counteroffer – either alone or with a partner. But he is also a cautious man. It is said in Paris that Mr. Oddo will only press ahead with his offer if he is sure it will be welcomed.

From the point of view of the French, China’s Fosun has gone about its takeover the wrong way. It snubbed the German financial watchdogs, for example, with its back-channel approach. Mr. Oddo wants to avoid such mistakes, and also doesn’t want to get into a bidding war with the Chinese.

Whether they want to or not, the bankers at BHF-Bank will probably have to prepare themselves for a prolonging of the agonizing impasse.

 

Michael Maisch is the deputy chief of Handelsblatt’s finance desk in Frankfurt am Main. Thomas Hanke is Handelsblatt’s correspondent in Paris. To contact the authors: hanke@handelsblatt.com; maisch@handelsblatt.com

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