Adolf Merckle: A story of the financial crisis

To live happily, live hidden: Adolf Merckle, 74, discreetly built one of Germany’s biggest fortunes before falling from grace through the stock market speculation that now threatens his industrial empire.

Almost unknown outside Germany, the billionaire heads the world’s 94th biggest fortune, according to Forbes magazine, with a total net worth last March of 9.2 billion dollars (7 billion euros).

Merckle controls the pharmaceutical group Ratiopharm, cement company HeidelbergCement and one of Europe’s biggest wholesale drug distributors, Phoenix.

His activities also include the manufacturing of electric motors, machine tools and snow cats for ski trail maintenance.

All is grouped under the roof of the family holding VEM, which does not release its earnings to the public.

Merckle himself, an unassuming grandfatherly figure, lives quietly in southwestern Blaubeuren, a town of 12,000 inhabitants in the prosperous Swabia region, and avoids contact with the media.

Even in the middle of a stock market maelstrom, it was his sons who confirmed that Merckle had lost millions of euros through speculation on shares in Volkswagen, caught up in market mayhem in the past few months.

According to press reports, he may have lost up to one billion euros (1.31 billion dollars) in the stock market.

And Germans were astonished to discover that even normally prudent family-owned companies have been caught up in actions more often associated with hedge funds.

"The workers were speechless,” said trade union member Peter Stohlhofer. “They thought the ‘papa’ was a good manager. They would never have believed that something like that was possible. They were amazed he was playing the market, like capitalists!"

In a rare interview, Merckle told the Frankfurter Allgemeine Zeitung newspaper in comments published last week that "We are now lumped together with hedge funds, while in fact it was a growth strategy that allowed us to fund companies that are fundamentally healthy."

"I have already overcome many of these so-called ‘market crashes’ but I could not have anticipated a financial and banking crisis of this size," Merckle added.

The image of stock market speculator is not one that fits Merckle easily.

He is a modest man who shuns jet-set events and is an avid mountain climber whose only luxury is to go on expeditions to the Andes or to the Himalayas.

Merckle personifies the wealthy but discreet German entrepreneur who run their business in ways that were "worthy of the 19th century," according to a press report.

Born in eastern Dresden in 1934 and the father of four children, Merckle inherited in the late 1960s a small pharmaceutical company from his father that employed 80 people.

Little by little, he built an empire, with sales of around 35 billion euros and more than 100,000 workers.

Merckle ran his group like a "patriarch," according to Stohlhofer, and did not welcome union activities.

Former Ratiopharm director Heinrich Zinken told Manager Magazin that Merckle was "greedy, envious and held grudges."

Press reports recalled the agility with which Merckle tried to avoid tax officials, placing part of his wealth in tax havens, including the northern German village of Norderfriedrichskoog at one point.

His empire is now teetering, and talks with banks on bridging loans have dragged on for weeks without success. As a result, the "patriarch" under pressure might now have to sell large parts of his holdings, a result that many in Germany couldn’t have foreseen.

Lenaig Bredoux/AFP/Expatica