Watchdog targets funds in stock exchange deal

19th May 2005, Comments 0 comments

19 May 2005, BONN - Germany's finance industry regulatory agency BaFin has launched an inquiry into the two hedge funds which blocked the plans for a merger of the Frankfurt and London stock exchanges, BaFin president Jochen Sanio said on Thursday.

19 May 2005

BONN - Germany's finance industry regulatory agency BaFin has launched an inquiry into the two hedge funds which blocked the plans for a merger of the Frankfurt and London stock exchanges, BaFin president Jochen Sanio said on Thursday.

Sanio said that in particular his agency is following up on suspicions that the two funds, major stakeholders in Deutsche Boerse, owner of the Frankfurt Stock Exchange, acted in concert to block the takeover of the London Stock Exchange.

The two funds were also suspected of possibly being in violation of rules requiring them to offer buyouts to other FSE shareholders.

"We are going to get to the bottom of this," Sanio said. The inquiry now is focusing on whether the TCI and Atticus hedge funds combined for 30 percent or more of the equity held in Deutsche Boerse.

If so, then under German law this should have been disclosed to the shareholders representing the other 70 percent and a buyout offer proposed to them, he said.

TCI and Atticus were the two funds which reportedly helped to block the plans for the Deutsche Boerse takeover of LSE. After the deal fell through, Deutsche Boerse chairman Werner Seiffert quit.

Sanio said BaFin had written to the two hedge funds posing a number of questions and set a deadline for them to respond.

He said that even if in the meantime the two funds' combined share of Deutsche Boerse had been reduced to below the 30 percent level, they would still be required retroactively to inform other stakeholders and make them an offer.

"Once they are in, they can no longer get out," Sanio said about the hedge funds' involvement in Deutsche Boerse. The minority shareholders would have grounds to sue for damages, he noted.

Sanio cited a superior state court verdict in Munich in late April which ruled in favour of a minority shareholder's suit against two other shareholders for failing to provide a takeover offer after their stakes had reached 30 percent.

He said the Munich court verdict was clear: "Those who practise intimidating tactics in order to influence decisions are carrying out the acting in concert". This is also BaFin's position, Sanio said.

DPA

Subject: German news

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