F R 1 2 - 9 7

Home | Update | Latest Issue | Gallery | FR Profile | Datafiles | FR 12/97 LUFTHANSA PRIVATISATION COMPLETED by Heiko Reuter Bank chief executives, a state secretary, a stock market director, of course the Lufthansa head, even a minister: The Frankfurt stock market looked like the Who is Who of the German pinstripe prominence on the 13th of October. They all came to announce the success of the largest government deal since the privatization of the Telekom: the final move to the stock market of Lufthansa. It was a billion Mark deal. The governments 35,7 percent Lufthansa share was put on the market, along with the 1,8 percent package of the government-owned Kreditanstalt für Wiederaufbau (KfW): 143 Lufthansa stocks were looking for a new owner. With a major advertising campaign ("The stock event 97"), the "global coordinators" of the whole privatization had planned to win especially the small and private investors. A shiny half-year balance was tempting, along with a rebate. The goal was to avoid that the majority of the entire Lufthansa stock was acquired by foreign investors. At that point, Lufthansa would not have been a German airline any more. All traffic rights would diminish and the airline would cease to exist. Accordingly, the Lufthansa stocks for sale were modified into a "vinculated name stock", making it possible to control who gets how many shares. Doing so, it was possible to reserve just a minor share of the stocks for foreigners and institutionalized investors. At least, they could be pleased with the high ranking officials. Lufthansa head Jürgen Weber himself promoted the event, to convince banks and investors and bait them to buy the Lufthansa stocks. At the top of the so called road-show teams, he and his management visited the financial centers of the globe. The effort was rewarded with tremendous success. Approximately 400000 private investors ordered Lufthansa stocks. Even though the Telekom's stock market entry had attracted two million private investors, the available Lufthansa stocks were oversubscribed twice. The government and KfW would have been able to sell each stock twice. Instead of DM4,7 billion, almost ten million Marks would have flown into the concern. Now, 50,97 percent of the Lufthansa shares are owned by German private stock holders, 36,39 percent of the 143 million stocks went into other countries, one percent is owned by Lufthansa employees, and the rest is owned by German banks and investors. The success was praised by big wheels such as German minister of transportation, Mathias Wissmann. Much of the appraisal was directed towards the Lufthansa employees "without who the airline would not be in such a great shape." Lufthansa's head of the board, Wolfgang Röller, was spoken very highly of - some observer said he was praised out of the company. Röller, who is being investigated for tax evasion, had retired from his position as head of the board of Dresdner Bank in September. Nevertheless, this little particular did not detract from the good mood of the celebration. KfW head Gert Vogt said: "It's hard to let go of sexy stocks." Lufthansa head Jürgen Weber was more pathetic by using the phrase "flight into freedom". The stock market reacted restrained. On the first day the new Lufthansa stocks were offered on the stock market, their value decreased by 40 Pfennig down to 33,40 Marks. By 17 October, it dropped further to 32,05 Marks. In financial circles, the Lufthansa paper is assessed as a rather conservative investment. A banker said: "It's a solid matter." But, one shouldn't expect gigantic jumps and record profits. Jürgen Weber continued to be optimistic in Frankfurt, saying that the stock has the potential to climb to 50 Marks. Now, Lufthansa is fully in private hands. Experts don't expect that much will change. The airline has more freedom now, not having to report to the ministries of transport or economy for each little problem. "There is no room for state-owned companies in liberal markets. Fair competition requires a neutral behavior from the government", the minister of transport reasoned the new system political frame. Still, Lufthansa's board and the stockholders will not cease to keep a close eye on the future development of the German carrier. The problems, such as the strong competition and high production costs, are still there to be coped with. Maybe, Lufthansa can now act faster in the markets. Quick decisions have never been a strong point of the good old hierarchical Lufthansa - even after the rescue program from 1992. While much has changed since then already, the carrier still looks somewhat slow as compared to its strongest competitors. Once the airline has managed to make the curve and gets a grip on the costs, the new and the old stock holders will be pleased. Under the bottom line, Lufthansa has a good position in the market. From page 20 of FLUG REVUE 12/97 Home | Update | Latest Issue | Gallery | FR Profile | Datafiles | FR 12/97 Copyright 1997 by Motor-Presse Stuttgart. All rights reserved. Last updated November 7, 1997 FLUG REVUE, Ubierstr. 83, 53173 Bonn, Germany