Heinz Hermann Thiele has criticized a €9 billion rescue plan that would see the German government take a 20% stake in the embattled flag carrier. Failure to bring Thiele on board could push Lufthansa into bankruptcy.
Lufthansa shareholders are gearing up to vote on a €9 billion ($10 billion) bailout plan that the cash-strapped airline has negotiated with the German government in a desperate bid to stay afloat.
The German flag carrier, which is bleeding €1 million of cash reserves each hour as sweeping global air travel restrictions to contain the coronavirus keep most of its aircraft grounded, has called on investors, unions and proxy advisory firms to urge shareholders to vote in favor of the proposal.
Lufthansa’s bailout plan faces a major roadblock in the form of German billionaire Heinz Hermann Thiele, who is opposed to the German government taking a 20% stake in the airline as well as two seats on its supervisory board as part of the deal. With only 38% of shareholders registered to vote, Thiele, who is Lufthansa’s biggest shareholder with a 15.5% stake, could effectively torpedo the deal that requires the backing from more than two-thirds of shareholders.
Thiele told the Frankfurter Allgemeine Zeitung (FAZ) that while he did not want to block the rescue plan, he wasn’t sure if the proposed plan was the best alternative available to Lufthansa. He said an indirect state participation via lender KfW could be an option, pointing out that Air France-KLM received state aid in the form of loans rather than an outright government stake.
German Finance Minister Olaf Scholz defended the government package on Monday after a crisis meeting with Thiele, calling it a “good, carefully considered proposal” that had already got the backing of the European Commission.
Who is Heinz Hermann Thiele?
Thiele, one of Germany’s richest men, owns a majority stake in Knorr-Bremse, the world’s leading braking systems maker for rail and commercial vehicles. He joined the company’s legal department in 1969 before going on to buy the company in less than 20 years. Thiele and his family made around €3 billion by taking the brake maker public in 2018. He also owns a 50% stake in railroad equipment maker Vossloh.
79-year-old Thiele is an outspoken critic of German Chancellor Angela Merkel for her immigration policy and her support for sanctions against Russia. He described her as “autocratic” at a Bavarian Industry Association event in 2018.
Why is Thiele opposing the bailout plan?
Thiele has criticized the government’s plan to build a stake in Lufthansa in a bid to rescue the beleaguered airline, saying that he was convinced that the “state is not the best entrepreneur.” In the FAZ interview, he opined that the rescue plan ignored the interests of Lufthansa shareholders and instead favored the German taxpayers.
“The federal government should limit itself to the financial aid packages, which are in principle very positive, and should not grow into the role of a return-oriented investor,” Thiele told the newspaper.
Thiele, like many other shareholders, is also concerned that the share sale to the government would dilute his stake in the airline, which he has boosted only in the past few weeks. While other major shareholders seem to have agreed to swallow the bitter pill with the airline staring into insolvency, Thiele is rumored to have other plans.
Last week, Thiele announced plans to sell some of his stake in Knorr-Bremse to raise about €750 million, giving rise to speculations that perhaps he was building a war chest to eventually expand his influence in Lufthansa, if the deal were to fall apart. Adding to speculations, Thiele’s KB Holding said the proceeds from the share sale will be used to support the billionaire’s “other private investments.”
What happens next?
Analysts at Citibank have outlined three scenarios playing out at Thursday’s vote. The first one envisages the bailout being approved by the shareholders with Thiele’s support. The second would see the bailout failing to muster up the required votes, with the government then offering to drop its planned equity stake, which is a relatively small part of the €9 billion package. The third case would see the deal collapse with the government refusing to offer any new terms followed by a crash in Lufthansa shares — which could provide an opportunity to Thiele to raise his stake in the airline and come up with a rescue plan backed by his own billions.
