Deutsche Bank

"Prince Burchard of Prussia, director of Brinkmann Dr DSA Carroll, chairman of Lloyds and Bolsa International Bank John M Brown, managing director of Carreras Frans van den Berg, president of Tabacofina Luis Gomez-Acebo, president of Tobacigar Dr F Kristinus, president of Brinkmann JC van Marken, chairman of Turmac and the Amsterdam Bourse David CS Montagu, chairman of Samuel Montagu & Co. Edmund L de Rothschild, chairman of NM Rothschild & Sons Bruno M Saager, general manager of Union Bank in Switzerland Franz H Ulrich, managing director of Deutsche Bank Franz Witt, managing director of Dresdner Bank Edmond G Wouters, chairman of Tabacofina Robert Wickenden, assistant managing director of Carreras Sir Derek Pritchard, chairman of Carreras JW Mayo, a British attorney Alexander Orlow, president of Turmac."

"Deutsche Bank, by contrast, made close to €200 million in fees on the Actavis buy-out in 2007, and got its loan back. Although it did not get all the interest, this led to handsome bonuses for its bankers, but the deal ended up putting the bank at risk of needing some help. This highlights a failing with the system that is sometimes called an agency problem, whereby bonus-hungry bankers take inordinate risks on behalf of their banks which foot the bill when things go wrong. It also leads to a lack of responsibility and accountability when deals become a problem."

"The two entrepreneurs, Peter Terziev and Georg Tzvetansky, had a pharmaceutical distribution business in Bulgaria, which had been the main pharmaceutical hub for the Eastern bloc in Soviet days. They had markets in eastern Europe, especially Russia, and had put bids in for the privatisation of three of the four state-owned pharmaceutical companies in Bulgaria, advised by Deutsche Bank. While they were raising the funds, the NATO bombing of Serbia began. Every night, the news was full of ‘war in the Balkans’ headlines and these guys were raising money for a company they named Balkanpharma, so they were being rejected by a lot of investment committees at Western institutional investors. I was asked to come and take a look at it to…"

"came up with the idea of reversing Balkanpharma into Pharmaco, simultaneously buying out the bank. To do that we arranged an issue of new shares. At the same time, Deutsche Bank sold more than half of its shares in a deal giving 60 per cent of the combined business to Balkanpharma’s investors. I ended up with just under 40 per cent of the new group and the bank had less than 20 per cent."

"Deutsche Bank, which was advising the entrepreneurs, wanted to invest its own capital through its special situations fund. The bank rules forbade it taking a majority stake, so I set up a consortium of myself, Pharmaco and Deutsche Bank and bought 90 per cent of Balkanpharma, leaving the company 46 per cent owned by me and Pharmaco, 44 per cent by Deutsche Bank and 10 per cent by the Bulgarian entrepreneurs who had brought us the deal. It was difficult building a consortium to put around all…"

"Deutsche Bank had been in the investment for 18 months and made a fivefold return. Pharmaco staged a road show for Icelandic investors and pension funds, taking about 30 of them to see the assets in Bulgaria. They were as happy as calves let out to pasture in the spring. No one in Iceland had done anything like this before.…"

"We closed the deal in the middle of 1999 and the whole business became Balkanpharma. Our biggest market by far was exports to Russia, but Bulgaria was also strong. Annual revenues were about $100 million when I became chairman, and by 2000 Deutsche Bank was already looking for an exit. ‘We’ve got a three-year plan but we’d like to see if we can accelerate our exit,’ one of the bankers told me. I was in no hurry. In the year since doing the Bulgarian deal, my father and I had invested in Pharmaco, becoming the largest shareholders. So I thought: ‘Let’s find a way to use the bank to get some cash on the table.’"

"the Italian department store king Maurizio Borletti. Surprisingly, on August 1, he makes an offer for the takeover of Karstadt. It's no secret who is supporting him: Deutsche Bank, also a stakeholder in Highstreet Holding. Though Borletti's empire with the Italian department store chain Rinasscente and the French budget department store brand Printemps has also been shaken, he can rely on the US investor Gordon Brothers for his bid for Karstadt."

"According to the latest status, Deutsche Bank, Pirelli RE, and the Italian family business Borletti Group hold exactly 49 percent of the real estate pool."

"Nicolas Berggruen in partnership with Deutsche Bank: In the Friedrichsaal on Unter den Linden, Nicolas Berggruen presents his guide Clever Governance. Politics for the 21st Century. The announcement states: "The book delivers a provocative proposal for a new political world order." The event is hosted by the Alfred Herrhausen Society."

"Later that year, in August, I met Steve again. I had just taken Actavis private in a €5.3 billion deal that Deutsche Bank was rolling €4 billion into. This deal could so easily have plunged Germany’s biggest bank into serious financial difficulties. I had built Actavis into one of the world’s biggest generic pharmaceutical companies in a competitive and consolidating industry. As industry consolidation quickened after 2006, I felt we had to decide quickly whether we were going to become predator or prey. Both could have worked, but we decided that because of the state of the lending markets we were going to become predators, leveraging up Actavis and buying other companies. We bid for a Croatian generics company, Pliva, which ended up being bought by a US company, Barr Pharmaceuticals, and went a long way down the line to try to buy the generics division of Germany’s Merck. Bankers fell over themselves to provide debt and convince us to bid and, although we ended up backing away from the price being asked, we had credit lines of €3.4 billion–€4 billion committed on a potential deal. This opened my eyes to the amounts that banks were willing to lend on such deals, so I decided to use that arsenal of debt to buy the 60 per cent of Actavis that I did not already own."

"There in the south of France, I left the boat, went into the famous Nikki Beach bar and ran into Steve Schwarzman again. I told him about the deal. ‘Interesting,’ he said. ‘Deutsche must be in a world of pain right now. You’ve timed it perfectly.’ And this was from a master of timing in the financial markets who had just finished a $4 billion stock market flotation of his own company. I had no idea what he was talking about. But just as Deutsche Bank had wired the money, the market had begun to turn and the syndication markets closed."

"Just as I was caught out by the Russian currency crisis in 1998, however, Deutsche Bank’s plan was scuppered by the tightening of the credit markets shortly after we signed the Actavis deal in August 2007. It was then unable to syndicate the loans on decent terms so held on to its position in the hope that conditions would improve in 2008, which of course did not happen. The bank put all the debt on its own book and got stuck with it in 2008 when the credit markets got much worse. It had taken an enormous bet and now had to live with the consequences."

"People have said to me that the deal could have sunk Deutsche Bank. It was my deal – and I put my hand up clearly for it – but the multiples that it was pitched at now look nothing short of staggering. We put in 12 times leverage and 5 times equity, with the result that Europe’s second-largest generic drugmaker was valued at 17 times its underlying EBITDA. Why did we value Actavis so highly? Well, it was the height of the stock market bubble and I was full of hubristic ambition. The company was growing strongly and I thought the buy-out was a great deal. Actavis was going from strength to strength so I would take it private, sell it in two to three years’ time and make three times my investment. I thought I would end up making more than €2 billion on the deal – my best return ever."

"Analysts came in and ascribed to Actavis a value in a freefall insolvency of just €1.4 billion, leaving a gap of €4.4 billion on what Deutsche Bank was owed. That would have crystallised a loss of more than €4 billion for the bank, so it had a serious problem. We started negotiating and agreed to restructure. Deutsche Bank did not revalue the loan until later, when the dust from the financial storm had settled. The whole thing was somewhat opaque and the numbers were well hidden in the annual report and only seen by those who knew what to look for. As for my own losses, when I took Actavis private my equity in the deal was €1 billion, after which I put in the additional €150 million I borrowed. It all went. My equity in Actavis became worthless. People say: ‘Was that real equity?’ But the point is that we had interest from other companies that were willing to pay that price at the time of Actavis being taken private. I could have walked away with over €1 billion if I had decided to be a seller, like other Actavis shareholders who sold out for cash at the time. Instead, I stayed in the company, making an earn-out deal with Deutsche Bank under which I was able to earn fresh, new equity."

"I needed to put more money into the business, by far one of the biggest companies in Iceland, so that it wouldn’t be taken over by Deutsche Bank. We had assets enough, and were working on selling them, but for the time being we had liquidity problems, so I borrowed €150 million from Landsbanki in March 2008 to rescue Actavis and fund salaries. This is what I was most criticised for in Iceland after the crash. ‘How could you borrow this in September 2008?’ my detractors cried. But I had started the process in March, borrowing in monthly instalments, with the last and largest payment coming in September. I gave a personal guarantee against the borrowings and, most importantly, that guarantee involved me pledging my holdings in Play, the Polish telecoms company, which was my most valuable and debt-free asset. Even so, the loan proved insufficient to get Actavis back on track and we were still busy scuttling around when the financial crash struck."

"I was in New York for a board meeting and I met up with Siggi in the Waldorf Astoria Hotel to flush out what Watson’s ideas were. Joining us in the meeting was Watson’s chief executive Paul Bisaro. As they began to describe their vision for the company and the sector, I couldn’t help but smile at the irony of it. Paul and I had crossed swords before in the very public battle for the Croatian pharma company Pliva, where we had each fought with every trick we knew. He had won and I had lost. That was water under the bridge, and I explained the situation for each of the stakeholders in Actavis. Deutsche Bank was looking for no risk at all, while my Novator vehicle was willing to look at the big picture in terms of future value creation. Watson’s idea was to pay with cash and stock, and clearly that would not work for Deutsche, even if it could work for us. I needed to find a way to make this work for both the bank and Novator. As they say, the devil is in the detail."

"But of course the moment I was seen to be back in the game, the calls began again. For me, it happened suddenly, almost as if it was on the flip of a coin. In late 2013, Jamie Dimon, chief executive of JP Morgan, rang me and said that he was personally at my disposal if I needed any help with a $1 billion bond issue being undertaken by Play, the Polish telecoms operator that I had set up back in 2005. The bank was very keen to handle it, and we were glad to oblige. Then I got a call saying the same thing from Brian Moynihan, chief executive of Bank of America. JP Morgan and Merrill Lynch ended up getting the mandate to act for Play on the bond issue. And as part of the process, which other global bank should be back at my office offering to lend us $1 billion but Deutsche Bank? That was ironic. Some of the bankers we dealt with this time were the same ones who had put all that debt into Actavis, very nearly losing a good deal of it. I rang them to say that they weren’t going to get the bond issue mandate, and then got a text message back saying that they were prepared to underwrite the whole issue. I couldn’t believe they were prepared to do the same thing that ended up with us both in trouble the last time we did a deal together."

"In Frankfurt, I agreed with Deutsche Bank that I would continue to explore the Watson opportunity and try to crystallise it into an offer that we could work with, based on our different motivations. The weeks rolled on and I sensed that the Americans at Watson were also trying to be opportunistic and buy Actavis on the cheap through the bank. I knew, however, that Deutsche Bank had a clear pain threshold, from which it could not budge. Its absolute minimum was €4 billion in cash – more than the Americans were offering. I needed to make sure that this would not turn into a game with no outcome. This was truly a unique chance for us all."

"My major business investment was about to get a second chance too. When at the airport about to depart on honeymoon to the Maldives, I was called by a former colleague, Sigurdur Oli Olafsson, who had previously been CEO of Actavis. Siggi Oli told me that his new company, US-listed Watson Pharmaceuticals, was interested in buying or merging with Actavis. He wanted to know if there was any way to achieve this in a low-key fashion, as the company was not interested in going into an auction. He said that Watson wanted to act soon, but understood from Deutsche Bank that a sale of Actavis was off the table for two years. He and his colleagues believed that a lot was going to happen in the world of generic pharmaceuticals in the following 24 months and the group had to move fast to be an acquirer instead of becoming a target."

"I would get very little out of a Watson transaction if it were all cash, so I saw an opportunity emerging in the form of a riskier contingent payment which would be paid entirely in Watson shares. I saw a potential trade between Deutsche Bank and myself in the method of payment. Once again, I would have to double up on risk in order to have a shot at the upside that my intuition was telling me was there to be had."

"It was a great moment for me, and I honestly felt that I had hit upon a way to look upon the uncertainties of the time in a positive way, and hopefully I managed to inspire a few young people in the process. Later that day I went with Kristin to a late lunch to celebrate the event, and we were sitting in a nice hotel restaurant on a fine spring day in Manhattan when I got a call from my office in London. My two colleagues were on speakerphone and proceeded to summarise for me the meetings that had taken place with Deutsche Bank in London that day, which were the culmination of very lengthy and stormy confrontations over the previous eight weeks. It was very bad news, and I felt as though I had been doused with a bucket of iced water. Deutsche Bank, my biggest creditor as a result of its loans to Actavis, had finally spelled out its terms. They were completely unacceptable. The scale of my Actavis problem finally dawned on me."

"Deutsche Bank, which had a lot of money at stake, insisted that I do two things. First, I had to put more money into Actavis. This was bad news, but I used all my remaining funds and injected €150 million into the company as fresh equity on top of the roughly €1 billion that I had put in initially. Second, Deutsche Bank insisted that I look for a buyer for Actavis, which I duly did with the help of Merrill Lynch Bank of America. Needless to say, trying to sell the company in this environment and with these internal issues proved futile. The indicative offers we received reflected the parlous state of the company and were very disappointing. We abandoned the sale process and set about coming up with a rescue plan. My Novator investment company presented a six-point plan, but getting Deutsche Bank to engage in discussing this and making a decision proved difficult."

"When it made this partial exit, Deutsche Bank had been in the investment for 18 months and made a fivefold return. Pharmaco staged a road show for Icelandic investors and pension funds, taking about 30 of them to see the assets in Bulgaria. They were as happy as calves let out to pasture in the spring. No one in Iceland had done anything like this before. It went fantastically well and the fundraising and relisting were highly successful."

"‘Let’s find a way to use the bank to get some cash on the table.’ I came up with the idea of reversing Balkanpharma into Pharmaco, simultaneously buying out the bank. To do that we arranged an issue of new shares. At the same time, Deutsche Bank sold more than half of its shares in a deal giving 60 per cent of the combined business to Balkanpharma’s investors. I ended up with just under 40 per cent of the new group and the bank had less than 20 per cent."

"As 2001 dawned, I was chairman of the combined listed company in Iceland, the first time I had been in a position heading a listed company. I was 34 and eager to use the financial firepower of the public markets to go even bolder and bigger in emerging Europe. My partners at Deutsche Bank had more than quadrupled their money in a short time and sold out to the market while I set my sights on making more acquisitions and growing the company into a global generic pharma powerhouse. My first choice was Delta, an Icelandic developer of new generic drugs that had originally been formed by Pharmaco in 1981. So we talked to the shareholders there."

"After we had owned BTC for ten or eleven months, I started to notice the old private equity mentality creeping in. Just like our first partner in a Bulgarian privatisation, the Deutsche Bank private equity group, they became fixated on exiting with a profit as fast as they could. In both cases, no sooner had we taken over the companies than their possible sales were up for discussion. This is all well and good as far as I am concerned, but it is quite different from my philosophy of wanting to grow and shape the business for a few years to maximise the value, rather than flipping an asset in a quick trade."

"We were also making a great deal of money and I stayed with the tried and trusted financial partners that I had worked with before. Deutsche Bank and Advent could be relied upon. The deals kept coming."