Best known once upon a time for his bow tie and grey suits, Swiss self-made billionaire and shareholder activist Martin Ebner has taken to baseball caps, barbecued sausages and country music. If you turn to his internet home page at www.bztrust.ch, he also winks at you knowingly as if to say, ‘Be smart. Follow me.’
Being smart, at least in this case, means acquiring shares in Ebner-controlled investment companies. Called Visions, these companies are designed to appeal to small investors. Some 50,000 shareholders are said to have done just that, buying stock in Pharma Vision, targeting pharmaceutical companies; BK Vision, aimed at bank and insurance companies; Stillhalter Vision, a derivatives specialist; and finally Gas Vision.
The current year has witnessed a veritable Ebner crusade in the cause of share ownership, providing a boost to his followers. Under the motto ‘Shares change your life,’ BZ Trust – the Ebner company that manages his Visions – has held lectures and discussions in a number of Swiss towns pushing the advantages of equity saving. And there is little doubt that his message has appeal. Says a young architect at one meeting, ‘Look at the money he’s made. You can’t go wrong with Ebner.’
BZ Trust also cemented alliances with discount brokers in Germany and Sweden, making it easier for small investors outside Switzerland to buy into each of the Visions. At last count, the Visions had corporate stakes valued at more than $20 bn. However, it’s not the volume that matters; rather it’s the selective Ebner strategy that has so far seen investors’ money go into a relatively small number of stocks with the aim of growing the Visions companies into major shareholders with clout. For example, Ebner-controlled companies are the largest single shareholder in both the Credit Suisse Group and Roche, the pharmaceutical heavyweight.
Once Ebner was happy to work behind the scenes, buying blocks of shares in Swiss blue-chip companies for himself and others while rattling the target company’s management with demands to increase shareholder value.
Today, after building private wealth to a figure estimated at well in excess of $3 bn from virtually zero 15 years ago, Ebner wants to change his public image from that of a self-interested, financial-market wizard to that of a swashbuckling defender of everyman’s shareholder rights.
That’s some change: when Ebner started out he concentrated on a dozen large institutional clients and pension funds, totally ignoring the small investor.
Boardroom strategy
Ebner also wants to take a seat on the board of companies where his Visions have taken significant stakes. ‘The Visions are judged by the performance of the companies they invest in,’ he explains. ‘Therefore, it makes sense for us to sit on the boards of these companies.’ Ebner asked earlier this year to join the boards of both Credit Suisse and Roche – to a mixed reception.
Credit Suisse’s chief executive officer, Lukas Muehlemann, said the bank accepted that as a successful banker Ebner was qualified for appointment as a director. But the bank was concerned that there could be a potential conflict of interest in that Ebner’s BZ Group, of which the Visions are a part, is a direct competitor of Credit Suisse.
Ebner denies any such conflict, but financial analysts accept that there may be a problem, given that Credit Suisse and the BZ group are both leading players in Swiss equity trading and investment. ‘There is a conflict of interest there,’ suggests Susanne Borer, bank analyst at Bank Vontobel in Zurich. Anyway, she adds, ‘Just because someone is a big investor in a company doesn’t mean that he has an automatic right to a seat on the board.’
Cool reception
At Roche, where Ebner supports the introduction of a single share category, his request for board representation was received more coolly. The introduction of a single share would take control of the pharmaceutical giant away from a founding family that is no longer active in the business, but dominates the company through their ownership of bearer shares. Bearer shares have voting rights; the company’s dividend rights’ certificates do not. If a single share was introduced by Roche, around 81 percent of voting rights would be transferred to present holders of the certificates; the other 19 percent would remain with present bearer holders.
Claudio Werder, pharmaceutical industry analyst at Bank Vontobel, says there are distinct advantages in adopting a single share, as investors would benefit from a clear, easily understandable capital structure. A clear structure also allows shares to be used by the company in future takeover transactions. ‘I’m confident that a single share will come eventually,’ Werder adds.
AndrŽ Baladi, a Geneva-based financial advisor who co-founded the International Corporate Governance Network, puts it more bluntly:’It is crazy that a family group controls a company while owning so little equity,’ he says. According to Baladi, Ebner has done a ‘fantastic job for shareholder rights in Switzerland. I like what he is doing.’
Nevertheless, having Ebner around can be far from comfortable. When he started a small brokerage bank in Zurich in 1985, the reception area featured a medieval weapon that was used by Swiss military mercenaries to knock the enemy down from their horses. At the time, he seemed to joke about doing the same to Switzerland’s establishment bankers; they gave him little chance of succeeding with his launch of the first new bank to open in Switzerland’s financial capital in decades. With hindsight, it’s clear Ebner was not joking.
After making a fortune introducing new financial instruments in a market noted for its stodginess, Ebner founded the Visions and started taking major stakes in Switzerland’s blue chips, notably Union Bank of Switzerland. Ebner saw himself as an active shareholder with a right to be heard on issues of corporate policy. This was an unusual standpoint in Switzerland in the early 1990s; and it wasn’t long before the board and management of UBS ran foul of Ebner, the bank’s largest individual holder. UBS wasn’t creating the value Ebner insisted shareholders were due. When his suggestions for a more efficient use of capital and more creative management were ignored by the bank, war broke out between UBS and its uncomfortable holder. This resulted in a prolonged battle that weakened UBS and led to its merger with Swiss Bank Corporation two years ago. The merger cost the head of Robert Studer, the old UBS’s chairman, former CEO and Ebner’s duelling partner.
Although Ebner has reduced his group’s stake in the new UBS and is not asking for a seat on its board, he remains an uncomfortable voice in the background for the bank. Since the merger UBS has suffered tumultuous times that have brought rapid changes in the bank’s top management.
However, Ebner has made it clear that he doesn’t think change at UBS has gone far enough to achieve the future growth performance he would like to see. If UBS doesn’t start measuring up to his standards in the near future, Ebner has said that he wouldn’t necessarily oppose a takeover of UBS by a foreign bank. He has also said that a split and public float of UBS into three separate divisions – investment banking, private banking and retail banking – could prove to be in the interests of the bank’s shareholders.
Merger carousel
When Ebner took an interest in Alusuisse-Lonza, it was an independent aluminum- chemical-packaging concern that had emerged from near bankruptcy to flourish under a new, but dedicated, Swiss traditional management. This management looked for a CEO to carry on their success and found him in Sergio Marchionne, a shareholder-value-dedicated Canadian. Little did they know that he would in due course team up with Ebner to oust them; and lead the company into a merger carousel.
First came the failure of an Ebner-supported merger of Alusuisse with Viag of Germany. Then a three-way merger with Alcan of Canada and Pechiney of France, with Alusuisse very much a minority partner, followed. The fate of this merger is still undetermined; the European Union’s anti-trust commission has put a road block up, frowning on a merger of Alcan and Pechiney, if not of Alusuisse with Alcan. Today, Alusuisse – or Algroup as it has become known – and chemical concern Lonza are separate entities with Ebner serving as chairman of the board of directors at both companies. His Visions control 27.5 percent of Algroup and 20.2 percent of Lonza.
After Percy Barnevik retired as CEO at electrical power giant ABB, the road became easier for Ebner to make his weight felt there. Barnevik was still chairman of the board but, according to Swedish tradition, he left fellow Swede Goeran Lindahl, now CEO, the independence to run the show. ABB managers long had wanted to introduce a single share to replace the unwieldy double Swiss-Swedish share construction, which had resulted from the original creation of the company through the merger of the its parents Brown Boveri of Switzerland and Asea of Sweden in the 1980s.
Apparently, Ebner helped Lindahl solve the problem behind a deadlock between major shareholders and management on the single-share issue, leading to its introduction in 1998. Ebner now sits on ABB’s board. Nevertheless, he remains uncomfortable even there, apparently having expressed the view that ABB should spin off its traditional power plant business to concentrate on more profit-enhancing units.
Ebner is also seen as the force behind the takeover by Credit Suisse of Winterthur Insurance back in 1997. This takeover was preceded by substantial buying of Winterthur stock by Ebner’s BZ group in true raider style. Fearing a fight with Ebner along the lines of the drawn-out UBS battle, Winterthur fled into the arms of Credit Suisse. Ebner’s companies are said to have made in excess of $300 mn from the takeover deal as the laughing losers.
Just as Ebner was smart enough to realize that the introduction into Switzerland of new financial products in the 1980s would make him a fortune through satisfying the needs of investors dissatisfied with traditional bank services, today he is once again filling a vacuum. The Swiss corporate world is in flux as an old guard retires. Typical is the case of Roche. Paul Sacher, the grand old man who guarded the founding family’s interests through decades, died last year. The family remains, but without a visible head. An ever-alert Ebner now sees his chance to change an outmoded share structure that has survived the late twentieth century intact. Looking at Ebner’s record, the possibility that he will succeed seems pretty good.
Be smart. Follow him. www.bztrust.ch, Wink! Wink!
