"Why Do Billionaire Icons Commit Suicide?"

In December, German billionaire Adolf Merckle gave a rare interview to defend his failing investment strategy.

“We are now lumped together with hedge funds, while in fact it was a growth strategy that allowed us to fund companies that are fundamentally healthy,” he told Frankfurter Allgemeine Zeitung. “I have already overcome many of these so-called market crashes, but I could not have anticipated a financial and banking crisis of this size.”

The family holding company, VEM Vermoegensverwaltung GmbH, lost money in 2008 after betting shares of Volkswagen AG, Europe’s biggest carmaker, would fall. In a two-day period in October, Volkswagen’s stock quadrupled after Porsche SE said it would raise its stake.

Merckle also controlled HeidelbergCement AG, Germany’s largest cement company, whose shares fell 70 percent last year as the financial crisis hurt demand for building materials and investors shied away from companies with debt.

German billionaire Adolf Merckle committed suicide by stepping in front of a train a few hundred yards from the factory he founded 36 years ago.

Merckle, who was 74, died as snow fell on the tracks last night at the station in the southern German town of Blaubeuren, where he had a home. The town of 12,000 people is also the site of his family’s Ratiopharm GmbH drug company. By 8 p.m. local time today, firefighters and police officers had cleared the scene of the suicide.

“There’s a lot of sympathy for this man,” Georg Fuhrmann, a spokesman for the town’s fire brigade, said in an interview. “He’s an icon.”

Merckle spent the last weeks of December negotiating with banks as he battled to save his empire, which he built from a pharmaceuticals company employing 80 people into a group of businesses with a combined payroll of more than 70,000.

Merckle, whose estimated $9.2 billion fortune put him 94th on Forbes’ list of the world’s richest people, was hurt by bets on Volkswagen AG and a 70 percent drop in the value of HeidelbergCement AG, which is controlled by the family.

“He was very down to earth,” said Peter Luckner, an employee at the Hotel Forellenfischer in Weiler, a hamlet next to Blaubeuren. “He didn’t show his billions.”

Merckle’s body was found by a railways worker, who was alerted by the driver of the train that killed the businessman, according to Fuhrmann. Visibility was “very bad” at the time because of the snowfall, he said. The temperature was freezing.

After taking over his grandfather’s business, Merckle created Phoenix Group, Germany’s largest drug wholesaler, and in 1973 started Ratiopharm, a maker of generic drugs.

“The family’s influence won’t continue if their problems are as big as reported,” said Karl-Heinz Irgang, a member of the Blaubeuren city council. Merckle was a “citizen of honor,” he said.

A bridge loan to the family is in place and Merckle’s death on Jan. 5 won’t affect that funding, three people with direct knowledge of the loan said. They declined to be identified as they’re not authorized to comment. A condition is that banks will take over the Merckles’ majority stake in HeidelbergCement AG, the largest of the family assets, and sell the drugmaker Ratiopharm GmbH, two of the people said.

Merckle, whose estimated $9.2 billion fortune put him 94th on Forbes’s list of the world’s richest people, committed suicide by stepping in front of a train, “broken” as his business empire crumbled under the growing burden of debt, his family said. He had been negotiating emergency financing after the value of his HeidelbergCement stock plunged and bets on Volkswagen AG soured, leaving his companies short of cash.

“Merckle didn’t have any more options to turn around his companies,” said Stefan Mueller, managing partner at Proprietary Partners AG in Frankfurt. “This is very tragic.”

Merckle had been negotiating for more than two months with a group of at least 30 banks led by Commerzbank AG, Deutsche Bank AG, Royal Bank of Scotland Group Plc and Landesbank Baden- Wuerttemberg. Spokespeople at the four lenders, which have been leading negotiations, declined to comment.

The Merckle holding company, VEM Vermoegensverwaltung GmbH, said yesterday the suicide wouldn’t change the restructuring plan for the business group, which spans the cement, pharmaceuticals and machinery industries. An official at VEM, based in Dresden, Germany, declined to provide details.

Merckle family companies have revenue of more than 34 billion euros. The family controls about 86 percent of HeidelbergCement, which has a market value of 3.9 billion euros and had profit of 2 billion euros and almost 11 billion euros in sales last year. Ratiopharm’s revenue is 1.8 billion euros.

VEM said on Dec. 30 a group of banks agreed to freeze their claims against the Merckle family holdings, paving the way for a rescue plan to be implemented in early January. Merckle signed the so-called standstill agreement and bridge loan before his death, the people familiar with the loan said.

The banks are providing immediate financing of about 400 million euros for VEM and Phoenix Pharmahandel, a drug wholesaler owned by Merckle that may also be sold, people familiar with the matter said. Merckle borrowed 415 million euros from Phoenix in an attempt to plug the losses at VEM, two people familiar with the situation said last month.

Managers at HeidelbergCement, Phoenix Pharmahandel and Ratiopharm as well as investment firm VEM, which has been co-run by Adolf Merckle’s son Ludwig Merckle, will continue operating the companies for the time being, one of the people said.

HeidelbergCement fell 6.2 percent to 31.26 euros in Frankfurt trading yesterday. The Heidelberg-based company dropped 70 percent last year, a decline that led the banks to seek additional financial guarantees from the billionaire.

VEM was also caught in a so-called short squeeze after betting Wolfsburg, Germany-based Volkswagen’s stock would fall. VEM lost “low three-digit million euros” on VW stock, the company said in November.

Merckle hired insolvency lawyer Eberhard Braun and said he’d initiate bankruptcy proceedings for VEM unless lenders provided him with restructuring capital, two people familiar with the situation said Dec. 10.

The Merckles have also been in talks with banks on a 700 million-euro refinancing package for the family’s Spohn Cement GmbH investment unit, people familiar with the situation said on Dec. 22. Merckle used loans to Spohn in 2005 to gain control of HeidelbergCement and he pledged the shares purchased by the Norderfriedrichskoog, Germany-based investment vehicle to the lenders as collateral for the financing.

    Like financier Rene-Thierry Magon de la Villehuchet, another billionaire aristocrat mogul has tragically opted to commit suicide after the collapse of their family business. Adolph Merckle, a hard working, good and decent man, apparently got involved in the casino like derivatives market and lost a large part of his fortune betting on the failure of another business, coupled with the housing crisis undermining his cement business. The thought of the losses to his thousands of employees and investors  was obviously more than he could bear. I pray his family will overcome their grief and salvage some of what Mr. Merckle built up in his lifetime. "Weeping may endure for a night but joy cometh in the morning" is what the Bible promises. Rest in peace, Adolph Merckle.

tags: adolf merckle  business  capitalism  free market  the economy  suicide  

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