TUI Exec Weathers Takeover Storm, Disappointing Markets | Business| Economy and finance news from a German perspective | DW | 08.05.2008
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TUI Exec Weathers Takeover Storm, Disappointing Markets

The CEO of German tourism giant TUI won a power struggle with the company's biggest shareholder. But the markets frowned on the outcome.

TUI logo with smiley face

TUI's CEO is still smiling, but it was a rough fight

Markets showed disappointment in reaction to the victory of TUI CEO Michael Frenzel in his power struggle with his Norwegian adversary, John Fredriksen.

Shares plunged some 4 percent on Thursday, May 8, the day after a lively annual shareholders' meeting at which Frenzel fended off the Norwegian shipping magnate Fredriksen's advances.

Fredriksen, a billionaire, is TUI's biggest shareholder. He kicked off hostilities at the packed meeting in the northern German city of Hanover on Wednesday with a shot across the bow of the blue chip firm's management.

Opposition to spin-off plans

Through his spokesman Tor Olav Troim, Fredriksen attacked the recent decision by TUI management to split its Hapag-Lloyd shipping activities into a separate entity and to explore a spin-off, a sale or a merger.

In the battle to control the management and structure of Europe's largest tourism company, Fredriksen bid for the stake of Alexei Mordashov, aiming to create a bloc big enough to oust Chairman Juergen Krumnow. He offered Mordashov more than $700 million and he turned it down, the Norwegian's business partner, Troim told reporters.

Mordashov, a Russian steel billionaire with 10 percent of TUI to Fredriksen's 11.75 percent, has been backing Frenzel and plans tourism ventures with TUI, which is splitting off its Hapag-Lloyd freight line after investor pressure.

During the annual meeting on Wednesday, a majority of 68.8 percent voted for Krumnow, thus rejecting Fredriksen's motion to replace Krumnow on the supervisory board by himself. CEO Frenzel received 69.2 percent of the votes.

The shareholders voted 57.24 percent against Fredriksen, TUI spokesman Robin Zimmermann told Bloomberg news organization.

Fredriksen, who wanted two board seats, would have settled for one if Krumnow left, Troim told shareholders.

"All time worst result"

"It was a close call,'' Troim told Bloomberg. "It was the all-time worst result for an acting chairman of a supervisory board in Germany. We did receive the majority of so-called free votes from those who own shares and are on the supervisory board. We'll be back soon.''

Troim reiterated that Fredriksen doesn't plan on selling his stake in the company, dismissing previous reports that said the billionaire may dispose of his shares. Troim didn't elaborate on what Fredriksen's next steps will be at this point in time.

Frenzel told the annual general meeting that TUI aimed to reach a deal on Hapag-Lloyd "swiftly," with the preferred method being a sale to an investor.

According to reports, TUI has been in talks to sell Hapag-Lloyd to Singapore's Neptune Orient Lines, which may offer as much as 6 billion euros to 7 billion euros ($9 billion to $11 billion) for the world's fifth biggest shipping line.

But Troim said TUI should first focus on developing Hapag-Lloyd's business and then merge with another shipping line.

Speaking out against Mordashov

Roundly applauded by shareholders, he also said that by deciding to grant Russian billionaire Alexei Mordashov a seat on the supervisory board the management had violated the rights of shareholders.

Mordashov was not at the meeting but he was represented by Vladimir Yakushev, managing partner of shareholder Alexei Mordashov's S-Group Capital Management, who did not address the meeting.

Earlier on Wednesday, TUI said it had slashed an operating loss during the first quarter with a strong performance from its shipping operations.

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