Posted on 01/06/2009 9:46:34 PM PST by CutePuppy
German Billionaire Commits Suicide After VW Losses
In killing himself German billionaire Adolf Merckle has become the latest casualty of the global financial crisis, his family saying on Tuesday he was broken by the struggle to salvage their business empire.
Merckle, who was the world's 94th-richest person in 2008 according to Forbes magazine, spent his life building a business conglomerate with about 100,000 employees.
The empire was poised to come crashing down after his family made wrong-way bets on skyrocketing Volkswagen shares.
The family has been under pressure to sell some assets or seek bridging loans and has been in talks with banks for weeks.
"The desperate situation of his companies caused by the financial crisis, the uncertainties of the last few weeks and his powerlessness to act, have broken the passionate family entrepreneur and he took his own life," a family statement said.
The 74-year-old industrialist died when a train struck him late on Monday, said prosecutors in the southern German town of Ulm, near Merckle's home.
Little was publicly known about the father-of-four, who lived in the southwest German state of Baden-Wuerttemberg and was said to enjoy skiing and mountain-climbing.
He received the German Federal Cross of Merit in 2005 for his achievements in fostering economic growth in the state of Baden-Wuerttemberg.
Market players said Merckle liked to keep a low profile and had seemed like a conservative investor.
Yet he became the most well-known victim of a share market squeeze which briefly made carmaker Volkswagen the world's most valuable company late in October.
Its share price rocketed to just over 1,000 euros from 210 euros in two trading sessions after rival Porsche made a surprise stakeholding announcement that sent short sellers of VW shares running for cover.
"He had a reputation for being very, very prudent, very cautious—a typical entrepreneur who always remained down-to-earth. So it was a huge surprise," said an analyst who asked not to be named.
At the time there was mostly speculation about banks and hedge funds that could have made heavy losses on VW. But banking sources told Reuters that Merckle's losses were estimated at 400 million euros ($539 million).
Struggle to Save Empire
A lawyer by education, Merckle held talks on state guarantees with German regional government of Baden-Wuerttemberg, although he ultimately opted out of such backing and sought to seek bridging loans from banks.
The prospect of a rich individual seeking state backing, with taxpayers' money, for losses caused by perceived reckless speculation sparked controversy in Germany.
"The billionaire with empty pockets" read a headline at Suedeutsche newspaper. "Will Merckle, the gambler of billions, be saved by the state?" asked Suedkurier. The losses fuelled speculation that the industrialist could sell generic drug company Ratiopharm or part of his stake in HeidelbergCement—both of which are based in Baden-Wuerttemberg.
Ratiopharm and HeidelbergCement are just two companies in the vast portfolio of the Merckle family, which also includes a maker of grooming vehicles for ski slopes, a sugar refinery and one of Germany's oldest foundries.
The whole portfolio generates around 30 billion euros in annual sales.
"Adolf Merckle collects companies like others collect watches," wrote Manager Magazin in one of the few extensive portraits of the German billionaire. "Hardly a single other German corporate dynasty acts in such unpredictable and relentless way as the Merckle clan from Blaubeuren."
Forbes recently ranked Merckle Germany's fifth-richest man with a fortune worth an estimated $9.2 billion. According to Forbes, Merckle's fortune was initially inherited from his Bohemian grandfather, but he had grown the latter's chemical wholesale company into Germany's largest drugs wholesaler, Phoenix Pharmahandel, with annual sales of 21.6 billion euros.
($1=.7416 euros)
© Copyright 2009 Reuters.
VW chart - shows a giant short squeeze when Porsche was buying additional shares to gain unconditional control of VW, which is 20% owned by German state of Lower Saxony. Porsche now owns or controls just below 75% which it would need for full financial control of VW.
But losing "only" $500M on VW bet alone would not seem to lead to a financial ruin, so things must be pretty bad in other businesses, and cash / liquidity may be hard to come by these days. Also could be a matter of honor, or shame.
Major crack in the Armor. So Sad.
If this is a suicide based on monetary losses, as we have been seeing lately, it has struck me that these people are apparently killing themselves rather than be faced with living a “normal life” as I do, and as most FReepers do. Perhaps we are all learning anew that the pursuit of great material wealth is fruitless and soulless, and when things go wrong, worthless.
Myself, I’m about to hop into a warm bed with a snowstorm whistling outside and nod off listening to Mark Levin on the radio. Could I do any better if I was a billionaire?
It is possible, I guess, that these suicides include guilt over the ruination of others who trusted the person. I know the thought that I might have destroyed the life savings of others would eat at me. I would hope it would not be because I personally would now have to manage to live on millions instead of billions.
He was never faced with “living a normal life”.
Even if “bankrupt” his remaining wealth would make him fantastically rich.
I’ve never understood how people with tens or hundreds or thousands of millions can go broke—really broke. Who doesn’t just put $20 million or $50 million aside where it can’t be touched and is never at risk?
I think it is the humiliation.
This guy made it himself and worked his ass off.
Godspeed to him....if that is possible.
Sad.
He also borrowed from his other (pharmaceutical companies) holdings to save the company, leaving them and himself in dire financial straights.
Seeing his entire life's work and family finances in ruins could not have been easy for 74-year old, who probably never led what most of us would call a "normal life". Some people drive harder and soar higher, but it's those heights that make it so much harder to land unscathed.
Some details here:
Facing Losses, Billionaire Takes His Own Life
investment losses due to debt...
leveraged out the wazoo????
somebody should have told this guy about dave ramsey...
It’s amazing how much of “wealth” isn’t real, including “real” estate. As we have seen from real estate bubble, much of that “wealth” was not real, it was ephemeral.
Many financially ignorant (and often envious) people only look at someone’s (or enterprise) assets or income, the ones less so look at assets minus liabilities; still more financially astute or educated look at liquidity of assets.
Who has not seen a “paper millionaire” during Internet bubble, whose options have not been vested by the time the bubble burst and company was bankrupt and gone? Those millions and billions of dollars were often not real.
It’s very difficult, if not impossible, to find large manufacturing or industrial / service companies that were not built and expanded on debt and leverage. Tech and biotech industries in recent decades were mainly built on equity financing, through creative private equity / venture capital companies (see Palo Alto, Arthur Rock for birth of modern VC funding).
I think I have heard Dave Ramsey once or twice. I assume his advice is oriented toward the consumers and consumer debt. It’s good, but it’s entirely different building a business, especially a large scale one that requires significant capital to start and to keep it flowing for building and expanding. It’s great and exhilarating when it works, it’s a huge letdown when it doesn’t, especially due to exogenous factors and circumstances, and it’s hardly ever easy or calm.
Sad for the family, but maybe if he had stuck to his productive businesses instead of trying to score easy money in speculation, things would have turned out differently.
"To speculate in stocks when you are no longer an insider is like buying cows by candle light." - Daniel Drew
True, he engaged in a gamble - not the most sensible way to make money, especially when one is in desperate need of it.
"The market can stay irrational longer than you can stay solvent" - John Maynard Keynes
Another article last month said that Porsche made more money on this deal than it did selling Porsches (I assume) for the whole year of 2008.
It's called gambling.
This means you could lose several million dollars that you don't have. (A lot of money for the wife of an Arkansas public official with a family income of only 5 figures)
He ends in a cruel and thoughtless gesture. Consider the trauma to the train driver who had to be the unconsenting executioner.
Did not see the article but it would not surprise me, though would it still be true this month, considering sharp drop of VW stock after the squeeze?
Still, it’s difficult to imagine a company which has 1/16th of sales and 1/10th of market cap of Volkswagen now owning its much larger rival, as well as VW subsidiaries Audi, Bentley, Bugati and Lamborghini (which do match well with luxury market of Porsche), as well as Scania, SEAT and Skoda. Of course, Ferdinand Porsche designed VW Beetle seven decades ago, so it’s a reunification of sorts.
Definitely not the most considerate way to commit suicide.
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