How Preussag became TUI : kissing too many toads can make you a toad


Dittmann, Ingolf ; Maug, Ernst ; Schneider, Christoph


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URL: http://ub-madoc.bib.uni-mannheim.de/2530
URN: urn:nbn:de:bsz:180-madoc-25304
Document Type: Working paper
Year of publication: 2007
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Sonderforschungsbereich 504 > Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung (Laufzeit 1997 - 2008)
Subject: 330 Economics
Classification: JEL: G32 G34 ,
Subject headings (SWD): Deutschland , Konglomerat , Tourismusindustrie , Corporate Governance , Börsenkurs , Übernahme , Unternehmensentwicklung , Logistikunternehmen
Keywords (English): Corporate Governance , Large shareholders , Germany , Diversification , Mergers and Acquisitions
Abstract: In the period 1997-2004, Preussag, a diversified German conglomerate of old economy businesses, changed itself into TUI, a company focused almost entirely on tourism and logistics. This paper analyzes how this strategy was executed and how it contributed to Preussag’s underperformance of the stock market. We collect 417 announcements of acquisitions, financial disclosures and other news and disentangle the impact of different parts of the company’s strategy. We find that only the divestitures created value, that the strategy to invest in tourism destroyed value, and that the acquisition premiums Preussag paid were mostly unjustified. Bad luck like the events of September 11, 2001 cannot account for the poor performance of the stock. Poor management resulted from poor governance, combining a state-owned bank as the largest shareholder, board interlocks, and insufficient managerial incentives. The case shows how divestiture programs increase the liquid resources available to management beyond free operating cash flows and casts doubt on the positive governance role of institutional blockholders.
Additional information: Available at SSRN: http://ssrn.com/abstract

Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Dittmann, Ingolf ; Maug, Ernst ; Schneider, Christoph (2007) How Preussag became TUI : kissing too many toads can make you a toad. Open Access [Working paper]
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