Spitfire List Web site and blog of anti-fascist researcher and radio personality Dave Emory.

News & Supplemental  

German Corporations Buying Major U.S. Businesses

Dave Emory’s entire life­time of work is avail­able on a flash drive that can be obtained here. The new drive is a 32-gigabyte drive that is current as of the programs and articles posted by 10/02/2014. The new drive (available for a tax-deductible contribution of $65.00 or more) contains FTR #812.  (The previous flash drive was current through the end of May of 2012 and contained FTR #748.)

You can subscribe to e-mail alerts from Spitfirelist.com HERE

You can subscribe to RSS feed from Spitfirelist.com HERE.

You can subscribe to the comments made on programs and posts–an excellent source of information in, and of, itself HERE.

Martin Bormann

I.G. Farben logo

COMMENT: German corporations are ramping up purchases of key American companies. In this regard, one must always bear in mind the control of corporate Germany by the Bormann capital network. (A working understanding of Paul Manning’s text–excerpted below–is fundamental to proper understanding and use of this website.)

Bayer, Siemens and Merck are discussed at length and detail in the Manning text.

Corporate Germany is effectively controlled by the Bormann organization, the economic component of a Third Reich gone underground.

Fundamental here, as well, is the work of Dorothy Thompson, who (writing of the Third Reich’s plans for global domination), related that the masters of German industry, finance and politics saw economic control leading automatically to political control.

The [Friecrich] Listian model was put into effect by the Third Reich, as can be gleaned by read­ing Ms. Thompson’s analy­sis of Germany’s plans for world dom­i­nance by a cen­tral­ized Euro­pean eco­nomic union. Ms. Thomp­son was writ­ing in The New York Her­ald Tri­bune on May 31, 1940! 

Foreign ownership of major corporations in Germany is severely restricted.

“Cash-Stuffed German Companies on a Global Buying Spree” by David Gelles; The New York Times; 9/22/2014.

Germany’s businesses have been the rare bright spot in the European economy in recent years, generating jobs and profits even as neighboring countries face persistent unemployment.

Now, many of the biggest German companies are capitalizing on their strength and striking big deals for overseas competitors.

In recent days, two multibillion-dollar deals were announced. On Sunday, the German engineering conglomerate Siemens announced a $7.6 billion acquisition of the Dresser-Rand Group, the United States oil products company. And on Monday morning, Merck of Germany, the chemical and drug giant, said it would pay $17 billion for Sigma-Aldrich, an American life sciences company. (The German Merck is not affiliated with the United States drug maker Merck & Company.)

“The overall confidence that is still prevalent here is a big factor,” said Tim Brandi, head of corporate practice at the law firm Hogan Lovells in Frankfurt. “It’s been a big rush in just a week’s time.”

Those two acquisitions lifted German acquisitions to more than $105 billion for the year, the most since 2007 and the third-highest total in 15 years, according to Thomson Reuters.

“It’s an optimal time to look for big acquisitions, especially with the financing market open and German corporations having strong balance sheets,” Dirk Albersmeier, head of German mergers and acquisitions at JPMorgan Chase in Frankfurt, said in an email. “So C.E.O.s are asking, ‘Why not do it now?’ ”

Merck will pay $140 a share in cash, or $17 billion, for Sigma-Aldrich, representing a 37 percent premium on the company’s closing price from Friday. The deal will expand Merck’s worldwide presence and represents the latest bet on life sciences by a German company.

The deal is expected to increase Merck’s presence in North America, give it added exposure to markets in Asia and increase its product offerings. The Americas accounted for about half of Sigma-Aldrich’s sales in 2013.

The combined life sciences business, if the merger had happened last year, would have had pro forma sales of about 4.7 billion euros (about $6 billion). Laboratory research and academia would have accounted for about half of the combined division’s sales.

Sigma-Aldrich, based in St. Louis, produces more than 230,000 chemicals and other products that are used in laboratory research and a variety of industrial and commercial sectors, including the pharmaceutical and food and beverage industries. It posted sales of $2.7 billion in 2013 and employs about 9,000 people in 37 countries.

Merck, which operates under the EMD brand in the United States and Canada, manufactures products for the pharmaceutical and chemical sectors. It posted revenue of about €11.1 billion in 2013 and employs about 39,000 people in 66 countries.

For Siemens, acquiring the Dresser-Rand Group signals an even bigger push into the booming American sector. Siemens is trying to position itself as a player in the shale oil boom, which has significantly bolstered oil and gas production in the United States and is likely to lead to a sharp increase in spending on the sort of heavy oil and gas industry compressors, turbines and other equipment that Dresser supplies, analysts say.

The price tag was seen as high, especially considering that orders for Dresser-Rand’s oil and gas products and services slumped last year. But Siemens is betting that, in the long term, Dresser-Rand will strengthen its ability to cash in on unconventional drilling techniques like hydraulic fracturing, or fracking, that have made the United States what Joe Kaeser, the Siemens chief executive, has called “the place to be for oil and gas.”

Julien Laurent, an oil and gas analyst at Natixis in Paris, said on Monday, “They are reinforcing their oil and gas business and focusing more on the U.S. market.”

The acquisition of Dresser-Rand also allows Mr. Kaeser to claim a victory after a recent loss to General Electric, Siemens’s longtime rival. Over the summer, Siemens lost out to G.E. for the energy assets being sold by the French industrial group Alstom.

But the merger mania sweeping German businesses is not isolated to particular industries. In addition to the drug and engineering deals, German technology companies and auto parts makers have been active, too.

Last week, the big enterprise software maker SAP announced it would acquire Concur Technologies of Seattle for $8.3 billion. Days before that, ZF Friedrichshafen said it would pay more than $13 billion for TRW Automotive Holdings, a car parts maker.

And Merck’s deal for Sigma-Aldrich is just the latest bet on the life sciences sector by a German company. On Thursday, the German drug maker Bayer announced that it was planning to spin off its polymer business into a new, publicly listed company as it focuses on health care and life sciences.

In May, Bayer agreed to pay $14.2 billion for Merck & Company’s consumer care business, acquiring popular brands like the allergy medicine Claritin and Coppertone sunscreen. . . . .

Mar­tin Bor­mann: Nazi in Exile; Paul Man­ning; Copy­right 1981 [HC]; Lyle Stu­art Inc.; ISBN 0–8184-0309–8; p. 205.

. . . . The [FBI] file revealed that he had been banking under his own name from his office in Germany in Deutsche Bank of Buenos Aires since 1941; that he held one joint account with the Argentinian dictator Juan Peron, and on August 4, 5 and 14, 1967, had written checks on demand accounts in first National City Bank (Overseas Division) of New York, The Chase Manhattan Bank, and Manufacturers Hanover Trust Co., all cleared through Deutsche Bank of Buenos Aires. . . .

 Germany Plots with the Kremlin; T.H. Tetens; Henry Schuman [HC]; 1953; p. 92.

. . . . The Ger­mans have a clear plan of what they intend to do in case of vic­tory. I believe that I know the essen­tial details of that plan. I have heard it from a suf­fi­cient num­ber of impor­tant Ger­mans to credit its authen­tic­ity . . . Germany’s plan is to make a cus­toms union of Europe, with com­plete finan­cial and eco­nomic con­trol cen­tered in Berlin. This will cre­ate at once the largest free trade area and the largest planned econ­omy in the world. In West­ern Europe alone . . . there will be an eco­nomic unity of 400 mil­lion per­sons . . . To these will be added the resources of the British, French, Dutch and Bel­gian empires. These will be pooled in the name of Europa Germanica . . .

“The Ger­mans count upon polit­i­cal power fol­low­ing eco­nomic power, and not vice versa. Ter­ri­to­r­ial changes do not con­cern them, because there will be no ‘France’ or ‘Eng­land,’ except as lan­guage groups. Lit­tle imme­di­ate con­cern is felt regard­ing polit­i­cal orga­ni­za­tions . . . . No nation will have the con­trol of its own finan­cial or eco­nomic sys­tem or of its cus­toms. [Italics are mine–D.E.] The Naz­i­fi­ca­tion of all coun­tries will be accom­plished by eco­nomic pres­sure. In all coun­tries, con­tacts have been estab­lished long ago with sym­pa­thetic busi­ness­men and indus­tri­al­ists . . . . As far as the United States is con­cerned, the plan­ners of the World Ger­man­ica laugh off the idea of any armed inva­sion. They say that it will be com­pletely unnec­es­sary to take mil­i­tary action against the United States to force it to play ball with this sys­tem. . . . Here, as in every other coun­try, they have estab­lished rela­tions with numer­ous indus­tries and com­mer­cial orga­ni­za­tions, to whom they will offer advan­tages in co-operation with Germany. . . .


Discussion

2 comments for “German Corporations Buying Major U.S. Businesses”

  1. Here’s an excrept from Thomas Piketty’s Capital in the Twenty-First Century discussing some of the differences between the incomes nations obtained from foreign ownership of assets in the 19th Century vs today. In addition to pointing out that it was inflation that basically saved Germany from its crippling post-war debts, the book notes that while France and Britain held substantial foreign capital positions during the colonial era (at 100-200% of national income) their current net foreign ownership is closer to zero today. Germany, on the other hand, currently has foreign assets worth ~50% of national income, which is pretty much the same level of foreign assets Germany held in 1913. So, while Germany had a much smaller colonial empire compared to France and Britain over a century ago, Germany’s foreign assets (as a percent of national income) dwarfs that of France and the UK today. It also notes that half of Germany’s current foreign assets where only acquired since 2000. It’s all one more reminder that, just as you can’t have the whole world running trade surpluses at the same time, the German high-end export-intensive economic model cannot be exported since you can’t have an entire world with a net positive foreign asset ownership at the same time too. And yet exporting that export-oriented model is exactly what Berlin is demanding of the entire continent as the only way out of Europe’s depression:

    Piketty, Thomas, and Arthur Goldhammer. Capital in the Twenty-first Century. Cambridge, MA: Harvard University Press, 2014. p. 142. Print.

    Note, too, that Germany over the past several decades has substantial foreign assets thanks to trade surpluses. By 2010, Germany’s net foreign asset position was close to 50 percent of national income (more than half of which has been accumulated since 2000). This is almost the same level as in 1913. It is a small amount compared to the foreign asset positions of Britain and France at the end of the nineteenth century, but it is substantial compared to the current positions of the two former colonial powers, which are close to zero. A comparison of Figure 4.1 with Figures 3.1-2 shows how different the trajectories of Germany, France, and Britain have been since the nineteenth century: to a certain extent they have inverted their respective positions. In view of Germany’s very large current trade surpluses, it is no impossible that this divergence will increase. I will come back to this point.

    In regard to public debt and the split between public and private capital, the Germany trajectory is fairly similar to the French. With average inflation of nearly 17 percent between 1930 and 1950, which means that prices were multiplied by a factor of 300 between those dates (compared with barely 100 in France), Germany was the country that, more than any other, drowned in public debt in inflation in the twentieth century. Despite running large deficits during both world wars (the public debt briefly exceeded 100 percent of GDP in 1928-1920 and 150 percent of GDP in 1943-1944), inflation made it possible in both instances to shrink the debt very rapidly to very low levels: barely 20 percent of GDP in 1930 and again in 1950 (see Figure 4.2).1 Yet the recourse to inflation was so extreme and so violently destabilized German society and economy, especially during the hyperinflation of the 1920s, that the German public came away from these experiences with a strongly antiinflationist attitude.2 That is why the following paradoxical situation exists today: Germany, the country that made the most dramatic use of inflation to rid itself of debt in the twentieth century, refuses to countenance any rise in prices greater than 2 percent a year, whereas Britain, whose government has always paid its debts, even more than was reasonable, has a more flexible attitude and sees nothing wrong with allowing its central bank to buy a substantial portion of its public debt even if it means slightly higher inflation.

    Posted by Pterrafractyl | November 13, 2014, 12:32 pm
  2. Given corporate Germany’s international buying spree, you have to wonder how many major multinational boards of directors are going to be pining to get scooped up by a German firm after reading an article like this:

    Bloomberg View
    Guess How Much Money Bill Gross Made Last Year?
    Nov 14, 2014 6:59 AM EST
    By Barry Ritholtz

    How much compensation the folks at Pacific Investment Management Co., better known as Pimco, haul in each year has always been a topic of fascination on Wall Street.

    In 2012, news reports suggested that the firm’s top 30 partners “pulled down an average $33 million a year in compensation in recent years.” A subsequent column by Felix Salmon guessed that the average investment professional at Pimco was making “roughly $7 million each” annually.

    A Pimco spokesman denied Salmon’s claim, responding that “The numbers cited in your blog post today are wildly inaccurate.”

    Salmon’s speculation was, indeed, wildly inaccurate — to the downside. Actual bonuses at Pimco are higher, much higher, than probably any outsiders previously believed. Based on news reports, public records and new data obtained by Bloomberg View, it appears that Pimco had a 2013 bonus pool for its 60 managing directors of almost $1.5 billion.

    So how much have Pimco’s top executives earned? According to documents provided to Bloomberg View by someone with knowledge of Pimco’s bonus policies, the numbers break down like this: Gross earned $290 million as his year-end bonus for 2013. Mohamed El-Erian, Pimco’s former chief executive officer and one-time heir apparent to Gross, received $230 million (El-Erian is a fellow Bloomberg View contributor).

    And the story doesn’t end with Pimco’s two most visible (former) employees. Former deputy chief investment officer Daniel Ivascyn — now serving as Gross’s replacement as Pimco’s chief investment officer — took home a $70 million bonus. Wendy W. Cupps, the global head of product management, garnered $50 million, making her one of the highest-paid woman in finance. (Her rocky push into equities was the subject of well-publicized haranguing by Gross.) Douglas Hodge, now the CEO, took home $45 million of holiday cheer. These giant bonuses almost make the $22 million awarded to Pimco’s president, Jay Jacobs, seem puny.

    The top three managers after Gross and El-Erian — Ivascyn, Cupps and Jacobs — were rumored to have been behind the coup that sent Gross packing to Janus Capital in September. Next month, free of Gross and El-Erian, these three will have an extra half a billion or so to keep to themselves or distribute to the other managing directors.

    Gross’s bonus — 20 percent of the total bonus pool for 2013 — places him in a compensation class of his very own. To put that figure into context, in 2013 Gross made just shy of what the next 20 publicly held finance company CEOs made combined.
    [see image]

    In the world of sports, you would have to take the total salaries, winnings and endorsement deals of LeBron James, Lionel Messi, Kobe Bryant, Tiger Woods and Roger Federer — together — to be on par with Gross.

    * * *

    How Pimco became such an earnings machine is a quirk.

    It has been four decades since it was spun out of Pacific Life Insurance Co., a move that was made in part to allow Gross a freer hand to manage the insurer’s fixed income portfolio. Since then, Pimco has grown into a behemoth, in terms of the bottom line and as a force in the bond market.

    Much of what we know about Pimco stems from Allianz SE’s $3.3 billion purchase of 70 percent of the firm in 2000. A publicly traded German insurer, Allianz has released some details about Pimco’s operations in its quarterly earnings reports. That data, along with mutual fund disclosures and filings, provide hints about the firm’s revenue.

    We can estimate earnings by looking at the largest Pimco funds. The 20 biggest have an average fee of about 61 basis points. Let’s lower that to account for discounts given to large institutional clients, and we get a rough estimate of about 50 basis points. On $1.82 trillion dollars, that yields $9.1 billion in revenue a year.

    Pimco is, by any measure, a fabulously wealthy company. Using my back-of-the-envelope revenue estimate, it generates far more revenue per employee than any bank or asset manager — almost four times as much as Goldman Sachs.
    [see image]
    When Allianz bought into Pimco, it picked up about $250 billion in assets under management. Pimco currently manages about $2 trillion.

    The bonus structure is a quirk of that original deal: Allianz’ partial purchase left Pacific Life owning 30 percent of Pimco. But Pacific Life wasn’t interested in running the asset-management business and even after the Allianz deal, everyone involved continued to defer to Gross’s financial and managerial judgment.

    Thus Pimco — based in Newport beach, California, and 6,000 miles removed from its majority owners — remained fully autonomous. Bloomberg View’s fee analysis suggests Allianz takes about 70 percent of the total revenue Pimco generates annually (plus or minus a few percentage points). Pimco keeps the rest.

    This same deal structure continued even after Allianz purchased the 30 percent of Pimco that it didn’t already own from Pacific Life in the mid-2000s. A subsequent restructuring in 2011 saw Gross and his team gain even greater control over the firm. That gave Pimco so much freedom in relation to its corporate parent that, as one analyst described it to Bloomberg News, it appeared as if it was “the tail wagging the dog.”

    * * *

    Part of the reason for Gross’s longevity after the Allianz takeover — and another element of the firm’s enormous wealth — is what we might call the “Pimco Premium.” Despite being in a competitive field including giant companies such as Vanguard and Blackrock, Pimco manages to charge more than the industry standard for access to its funds and its separately managed accounts.

    Why? When competing for business, the firm has had an unbeatable combination of a long history and outstanding long-term results. (At least it did, until recent bad bets on rising interest rates by Gross torpedoed the 1-, 3- and 5-year record of the flagship Total Return Fund.)

    Pimco also became the go-to company for the Federal Reserve and U.S. Treasury in many of the credit facilities used to combat the continuing economic fallout from the financial crisis. Pimco’s success in the federal government’s program to jumpstart consumer lending and a variety of mortgage-backed security programs added more luster to its reputation. Gross even managed to buy up lots of MBS’s before the Fed officially announced the programs. Shareholders of the Total Return Fund netted about $10 billion from its mortgage plays.

    Beyond the sheer size of Pimco’s bonuses, there are other aspects of its compensation practices that should give pause to everyone involved in institutional asset management.

    For one, Pimco has been part of a publicly traded company — Allianz — for the past 15 years. Unbeknownst to Allianz’s shareholders, employees of one of its business units have been paying themselves these extraordinarily large sums of money.

    In the U.S., it is hard to imagine $1.5 billion in spending on anything not being disclosed. Almost 16 percent of Pimco’s revenue is a “material” amount of money that would normally require disclosure in the U.S. But Allianz is a German company, subject to different regulations.

    Another item worth noticing: Pimco investors represent pension funds, foundations, charitable trusts, 401ks and other retirement accounts. Pimco’s enormous, self-paid bonuses come right off of the top of the returns those outside investors might otherwise receive.

    In a recent Allianz presentation following Gross’ departure from Pimco, the firm’s new chief executive, Doug Hodge, stated, “We don’t comment on matters of compensation.”

    But while Gross may be gone, the high fees and compensation structure at Pimco appear to remain firmly in place. Allianz doesn’t seem inclined to change things — it started a $279 million award program this fall to keep people from following Gross out the door.

    Ok, so in addition to learning that Bill Gross was paid almost as much as the combined pay packages of the CEOs of BlackRock, American Express, Goldman Sachs, Wells Fargo, Capital One, Travelers, ACE, Citigroup, Prudential, PNC, State Street, Simon Property Group, AIG, MetLife, Morgan Stanley, Bank of America, JPMorgan Chase, USB, BNY Mellon, and Berkshire Hathaway combined (although presumably other forms of compensation balance it out a bit), we also get to learn that one of the justifications for this extreme pay package was the great historical performance of Pimco’s funds. Great historical performance…assuming you ignore the last few years:


    Part of the reason for Gross’s longevity after the Allianz takeover — and another element of the firm’s enormous wealth — is what we might call the “Pimco Premium.” Despite being in a competitive field including giant companies such as Vanguard and Blackrock, Pimco manages to charge more than the industry standard for access to its funds and its separately managed accounts.

    Why? When competing for business, the firm has had an unbeatable combination of a long history and outstanding long-term results. (At least it did, until recent bad bets on rising interest rates by Gross torpedoed the 1-, 3- and 5-year record of the flagship Total Return Fund.)

    In other words, Bill Gross and Mohamed El-Erian were making the one of the same mistakes about interest rates and inflation that Paul Krugman has been publicly chastising economists about for years. And for that they got almost $290 million and $230 million dollars. A year. And now that Gross and El-Erian have left Pimco, investors are leaving Pimco too. Is there anything that isn’t wrong about this situation?

    Keep in mind that Pimco’s pay package is presumably an uncharacteristic fluke overall given the historically low CEO compensation in Germany compared to their US counterparts. But given the recent history where Germany’s leaders suddenly dropped the mask and started demanding unrelenting austerity across Europe, you have to wonder just how uncharacteristic the Pimco compensation model will be for major Germany firms going forward.

    Posted by Pterrafractyl | November 14, 2014, 2:24 pm

Post a comment