February 10, 2012

Erwin Müller paralyses Douglas Holding

Douglas store facade (photo: Douglas)
Alluring scent: A battle is raging for the control of the "Douglas" perfumery chain in Europe (photo: Douglas)
Anyone for poker? Douglas, the health & beauty-cum-lifestyle group, remains in turmoil as it tries to rid itself of an unwanted host, competitor Erwin Müller.

Swabian patriarch Erwin Müller, who already holds a stake of around 10.8 per cent in the retail multiple, was always a strange and uncongenial bedfellow for Douglas. However, suave and patriarchal Douglas Chairman Jörn Kreke as well as son Henning, CEO, have always been at pains to deny this in public.

Behind the scenes, the Krekes, who pool around 12.7 per cent of Douglas's shares, are said to be looking for external investors in order to increase their holding in the company. It is also believed that they are exploring what it would cost them to take Hagen-based Douglas plc private.

Over two-thirds of sales in Germany

Group revenues for 2011/2012 are expected to come in at around €3.4bn ($4.5bn) and ebitda is estimated at between €200m ($265m) and €250m ($330m). Douglas is represented in Europe with 1,168 perfumeries in 17 countries.

Around 68 per cent of consolidated revenues are still achieved in Germany, the lion's share of which is accounted for by the "Douglas" perfumeries. However, Douglas Holding also owns 295 "Thalia" bookstores, 207 "Christ" jewellery, 13 "AppelrathCüpper" fashion stores, and 245 "Hussel" confectionery shops.

Apparently, the Krekes had originally wanted to make an announcement regarding their future plans in time for the next AGM on March 21.

Müller's blocking option

The announcement on February 1 that Erwin Müller now owns an option on a further 15 per cent of shares, which can be exercised in March and October, has undermined any such plans. The main difficulty for the Krekes now is to know how large a stake Müller could obtain in the future.

The most probable scenario, i.e., that the options were acquired from financial institutes such as Bank Sarasin, could well give Müller a so-called "blocking minority", representing at least 25 per cent of the equity. This would enable Müller to block important decisions within the company, should he so choose, but would not give him ownership.

Other scenarios

However, in a nightmare scenario for the Krekes, it cannot be excluded that individual members of the broadly-based Kreke-Eklöh clan could also have sold options to Erwin Müller.

Another possibility is that Müller has an option on part of the majority shareholding owned by German food manufacturer Dr. Oetker (25.81 per cent). This would veritably set the cat among the pigeons.

To say the very least, all this represents an immense distraction for top management which could hinder them from tackling the company's operative problems. These primarily include the "Thalia" bookstore chain which juggles with its own online shop in an increasingly e-book-oriented age.

Lebensmittel Zeitung with its online sisters (photo: LZ)
Lebensmittel Zeitung with its online sisters
Read in German: 'Text' by newsdesk manager Jan Mende on page x of 
Lebensmittel Zeitung, no. 6, 10.02.2012

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