Related article: Billionaire Merckle Said to Need as Much as EU1.1 Billion
Dec. 1 (Bloomberg) — Germany’s Merckle family, with less than 24 hours to rescue the VEM Vermoegensverwaltung GmbH investment unit, hasn’t obtained bridge loans that would save the company.
“Negotiations are continuing,” said Doris Feinle, a VEM spokeswoman, by telephone today. She declined to comment on the timing or likelihood of an agreement.
The Merckle family, battered by wrong-way bets on Volkswagen AG shares and plunging stock markets, has until tomorrow to arrange short-term loans after a group of banks signed a so-called standstill agreement blocking them from making claims. A failure may have repercussions for an empire spanning the cement, machinery and pharmaceuticals industries.
Adolf Merckle, 74, the head of the family, won a two-week stay Nov. 20 after giving personal guarantees from his $9.2 billion fortune to the banks to try to get funding, three people familiar with the situation said at the time. VEM lost “low three-digit million euros” on VW stock, and banks demanded more guarantees from the company after shares used as loan collateral declined in value, the investment unit said at the time.
Merckle may be forced to sell assets including German generic drugmaker Ratiopharm GmbH, people familiar with the situation said. The situation at VEM threatens the family’s other holdings, including HeidelbergCement AG, Spohn Cement GmbH, Ratiopharm and the Phoenix Pharmahandel AG pharmaceuticals wholesaler, they said.
HeidelbergCement fell as much as 6.3 percent in Frankfurt trading and declined 1.02 euros, or 2.7 percent, to 36.35 euros as of 12:08 p.m.
Koetitzer Ledertuch- und Wachstuch-Werke AG, a Norderfriedrichskoog, Germany-based company the Merckles use for investments, said in an earnings report on its Web site dated last month that it lost 216 million euros on options and securities sales. The unit, which employs 3 people, said it may have to write down the book value of its stake in Spohn Cement GmbH, which controls HeidelbergCement.
Commerzbank AG, Landesbank Baden-Wuerttemberg, Royal Bank of Scotland Group Plc, Deutsche Bank AG and HVB Group are leading the group of banks in negotiations, the people said.
VEM became caught in a so-called short squeeze after betting Wolfsburg, Germany-based Volkswagen’s stock would fall. Porsche SE’s Oct. 26 announcement that it planned to increase its stake in Volkswagen to 75 percent sparked a race by short- sellers to buy from a shrinking pool of stock, causing Volkswagen shares to surge more than fourfold in two days.
Last Updated: December 1, 2008 07:09 EST
By Sheenagh Matthews and Angela Cullen