Nationalization plan
June 3, 2009
Almost 74 percent of shareholders attending the meeting in Munich on Tuesday approved government plans for a 2.95 billion euro (4.23 billion dollar) capital increase that will allow the German government’s financial market stabilization fund (SoFFin) to extend its stake in the company from 47.3 to 90 percent.
Speaking after the vote, Prof. Dr. Hannes Rehm, Chairman of the SoFFin management committee expressed his thanks to the company shareholders who agreed to the new measures.
“We are relieved that we do not have to resort to the option of expropriating shareholders,” he said, adding that the ballot had cleared the way for a “quick and unproblematic stabilization of HRE.”
After subscription of the shares, SoFFin, which was set up in 2008 as a short-term fund to keep financial markets stable, will be in a position to squeeze out the remaining 10 percent of shareholders, including the US investment fund, J.C. Flowers, which doesn't want to give up its shares.
Squeeze-out small print
In an interview with the daily Berliner Zeitung newspaper, Michael Kunert of the Schutzgemeinschaft der Kapitalanleger, an organisation which aims to protect the rights of minor shareholders, said such a squeeze-out was contrary to the free market ideals set out in Germany's constitution.
“Divestment with a 90 percent stake is provided for under the financial market stability law, but it's not entirely straight forward under constitutional law,” Kunert said.
Rescue operation
The German government, which already provides the bulk of the 102 billion euro guarantees currently propping up HRE, has been at great pains to prevent the collapse of the country’s second-largest mortgage lender. Berlin fears that if HRE were to fall, it could trigger a domino effect across the financial sector.
“Our aim is to rescue HRE,” Prof. Dr. Hannes Rehm said, “which is why the complete takeover is necessary.” He said in light of the huge amounts of public money already invested in Hypo Real Estate, the government owed it to German taxpayers to bring it under state control.
However, this takeover may not be a permanent move. In an interview with the Sueddeutsche Zeitung ahead of Tuesday’s meeting, Rehm said he would be seeking to re-privatize the lender as soon as it was a viable option.
tkw/dpa/AFP
Editor: Chuck Penfold