The open struggle for power in Tengelmann

A picture of better days? Karl-Erivan Haub with his two brothers Georg and Christian (from left).

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On April 7, 2018, Tengelmann’s co-owner Karl-Erivan Haub got lost in the Swiss mountains near Zermatt. Two and a half years later, the battle for power is raging in the company. The now-open dispute in one of Germany’s wealthiest families keeps the German newspaper forest busy and even threatens to harm the company, which generated sales of around 8.1 billion euros last year with more than 90,000 employees. The family of the supposedly deceased Karl-Erivan recently received an offer worth billions of dollars from his brother Christian Haub. But will she accept it?

Obi, Kik and Tedi as main holdings

Karl-Erivan and Christian have run the Mülheim an der Ruhr group of companies since 2000 as personally responsible partners. Karl-Erivan, who studied economics and social science at St. Gallen from 1978 to 1983, handled the business in Germany and Europe, while Christian managed the investment portfolio in the United States. Tengelmann is a classic family strategy holding company. The group has majority stakes in the DIY chain Obi, the textile discount chain Kik and a minority stake in the one-euro discount chain Tedi. Additionally, there are dozens of other company investments now managed under the Tengelmann21 brand, as well as a global real estate empire worth billions. There have reportedly been bitter rivalries between the siblings for a long time.

In early April 2018, a tragedy presumably occurred at the Klein Matterhorn. Karl-Erivan, an experienced skier and mountaineer, left alone to train in a glacial area, from which he never returned. It has been lost to this day and despite intensive search, no mortal remains have been found. The loss not only shocked the family, but also raised many questions about the group of companies.

Just two weeks after the accident, Tengelmann announced that Christian Haub will assume sole leadership of the group with immediate effect and thus also the duties of his older brother. In June 2018 there was already a family memorial service for Karl-Erivan. Both brothers own 34.3% each in the company, a third brother named Georg owns 31.3%. Karl-Erivan’s shares are currently represented by his wife Katrin as an out-of-home caregiver. So far, the Cologne-based family has been unable to reach an agreement with Christian and Georg on how the company should proceed.

Difficult search for an amicable solution

In essence, it’s about who should pay inheritance tax in the triple-digit million range. According to media reports, wife Katrin Haub and their two 27-year-old children hope that the company will take over the payments by dissolving the corresponding reserves in the balance sheet and selling the shares, which Christian and Georg, who want to continue the business familiar, strictly reject. However, in an interview with the “Handelsblatt” in June, Christian Haub claimed that he was looking for a solution to the inheritance tax problem that would work for the relatives of his missing brother, his brother Georg and himself, as well as for the company. However, no agreement is in sight. This week, Christian made an offer worth 1.1 billion euros for the company’s shares in Karl-Erivan.

However, the relationship with the family of the disappeared person was also aggravated by the fact that Christian and his brother applied to the Cologne District Court for Karl-Erivan’s death declaration in early October to ensure clear and stable relationships. between shareholders and planning security for the group of companies. It is said that the widow was outraged. If the death declaration is confirmed, the inheritance would occur with the consequence that the twins, who also have a US passport, would have to pay German and US inheritance taxes.

The amount of the inheritance is based on the proportional value of the business. Christian Haub’s Stuttgart lawyer, Mark Binz, explained in an interview with NZZ that according to Tengelmann’s bylaws, a shareholder who makes use of his right to terminate would only receive 70% of the market value of his shares, and only after a waiting period of ten Years. The auditing firm KPMG estimated goodwill at around € 4 billion before the outbreak of the corona pandemic. This gives rise to a claim for severance pay of 960 million euros, which will expire in seven annual installments from 2030. Regarding the family relationship, Christian Haub is willing to increase the amount to 1,100 million euros and pay it with relative speed.

Confrontation at the shareholders’ meeting

A shareholders meeting, which has already been postponed due to disputes, will be held on October 28, which will also deal with the complete replacement of the group’s three-member advisory board (at Tengelmann, a counterpart to the supervisory board of a public limited company). management as of January 1, 2021. Also on the meeting agenda is discharge approval and a motion by Katrin Haub, according to which provisions of 1.9 billion euros should be released and distributed. Christian and Georg reject this, however, because it would reduce the company’s share capital by about half.

Two years ago, a dispute broke out over her cast. At the end of 2018, the Duisburg regional court had declared partially null and void at the request of Katrin Haub and her children this summer. An old Karl-Erivan confidant had left the advisory board and was replaced by Duisburg family businessman Franz Markus Haniel with a two-thirds majority. However, in the eyes of the plaintiffs, a three-quarters majority would have been necessary. The process is now in second instance.

The meeting at the end of October is like a showdown. If Katrin Haub and her children block the election of the advisory board, Christian Haub threatens an exclusion lawsuit. According to his lawyer Mark Binz, a partner can be excluded under the law for good cause if, for example, he damages the company. Katrin Haub has been making information requests for harassment for two years, has filed a legal action for abuse against the appointment of Franz Haniel as a member of the advisory council, has unjustifiably complained about Christian Haub’s service contract for months and has refused to fire the chairman of the advisory council for flimsy reasons, says Binz. She just wanted to get a higher purchase price for Karl-Erivan’s share. The other side, of course, sees it completely differently.

The outcome of the dispute, which is taking place on several levels, is still open. In any case, it is now taking its toll that Haub, then 58, did not transfer shares to his children on time or at least made provisions for the payment of the German inheritance tax estimated at 450 million euros, which could now force the family to sell their stake. “The successor to the family business is a classic Achilles heel. Therefore, the Tengelmann case is also a lesson for other entrepreneurs, who often do not even know how high the impending inheritance tax would be in their case and who often do not even have a will, “says Binz, who has been in charge of family businesses for more than four decades. and he is an expert in estate planning.

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