German companies ready for wholesale restructuring

Corporate Germany is bracing itself for an unprecedented wave of restructuring after the approval on Friday of the government’s plans to abolish taxes on capital gains made by quoted companies selling shareholdings in each other.

The steps, which come into effect in January 2002, threaten to expose many of the totems of the German corporate landscape to domestic and foreign takeover. “There is no doubt this will enhance overall structural change to a very large extent,” said Hartmuth Jung, chairman of UBS Warburg in Germany and co-head of European mergers and acquisitions at the investment bank.

For years, many German companies have been insulated from the hostile environment of Anglo-Saxon capitalism by a network of cross-shareholdings. Such protection is now set to be stripped away as the new tax regimes makes it easier for large shareholdings to be sold.

The largest holders of stakes in industrial companies are Germany’s insurance companies and banks that took them instead of cash on loans made during the post-1945 reconstruction. Originally seen as a way to provide industry with a stable shareholder base and a ready source of funding, these stakes have tended to be low-yielding and a drag on the banks’ return on equity.

Deutsche Bank, Germany’s largest bank, holds large stakes in such industrial groups as DaimlerChrysler, the car maker, Heidelberger Zement, the building materials group, and Metallgesellschaft. Reuters