Are the locusts about to descend on Germany's Cewe Color?
Hollander's company, which is quoted on the stock exchange, is his personal kingdom. Every year, its employees print billions of private snapshots onto paper -- so there's a lot of dealing with the past here. Right now, it's all about the transition from the world of analog to that of digital images. But recently, the stocky blond man has been confronted with another hot topic: Cewe Color looks like it could fall victim to those financial investors Franz Müntefering -- Germany's Social Democratic vice chancellor -- ominously referred to as "locusts" back in the spring of 2005.
Two US hedge funds, K Capital and M2, own more than 16 percent of Cewe Color's stocks. Now they're demanding Hollander be sacked. They also want a new board of directors and a special dividend of €5 ($6.5) per share for all shareholders, to be debt-financed by the company. The coup-like demands are to be formally sanctioned at a specially called stockholders' meeting.
This attack on its coffers comes right in the middle of a major restructuring effort at the traditional company. The turnover from the development of conventional film is falling. Only 20 out of a former 29 production plants are still in operation, and more shutdowns are planned. Seventy employees will be let go shortly in Berlin alone. The company's turnover from digital photography is rising. Most of the customers who entrust their image data to the company via the Internet or the local shopping center are women. But the company's old area of specialization is still shrinking faster than the new digital one is growing.
What is more, efficiently structured rivals such as foto.com are getting to Cewe Com in the price war. In January Hollander had to announce that returns for the current year are shrinking to €24 million ($31 million); turnover is expected to be below €400 million.
The Oldenburg company must bleed
David Marcus, who runs M2 and has been active as a Cewe investor since 2005, has suddenly decided the restructuring process isn't happening quickly enough. While he still praised the company's "excellent" management in an e-mail from early November, waxing eloquent about how much he loves the company, those kinds of friendly greetings from New York have now become a thing of the past.
Marcus has written two letters to the board of directors, accusing the company's management of being incapable of implementing a successful restructuring process. "It's a listed company, not a family business!" the hedge fund expert thunders in conversation. He says the Cewe bosses are "fighting an old battle" and that the company needs "hungrier and more aggressive people at the top."
Marcus rejects the term "locust." "A locust's typical behavior would be to grab all the money and then leave," he says. He insists he's thinking in the long term, and that €5 per share is reasonable. "Other people are frustrated too," he says, presumably alluding to two major shareholders in Switzerland. In fact, the New York businessman's sudden impatience is easily explained.
Marcus has invested the hedge fund's $300 million assets in 17 European companies, including German companies such as EM.TV, GEA and Constantin Film. But M2's return dropped from a presentable 34 percent in 2005 to a meagre 7.5 percent in 2006. His spoiled investors will hardly be willing to tolerate another such drop. And so the Oldenburg company must bleed.
Meanwhile, Cewe's CEO Hollander "refuses to accept any criticism of his person whatsoever, as usual," a company insider complains. That's the reason why Hollander unwisely made his war with the hedge fund public, the same person says. Hollander accused M2 of blackmail during a press conference on Jan. 30. It was only then that the funds made their criticism of the company public. Hollander doesn't want to hear about mistakes, billion-dollar losses in France and problems with weak marketing. The difference of opinion seems insuperable: "I'm standing in front of the safe. He's got to shoot me down," says Hollander.
High noon draws closer in the lowlands of northern Germany.
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