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Gemany: Bankers' indecent proposal

The fear and loathing generated by Krupp's attempted takeover of Thyssen, a rival German steel company, has not only thwarted that particular deal but also put back the entire German M&A business by several years.

No sooner had Krupp's plan to take over its rival and create one large steel company in the Ruhr been leaked last month than Thyssen cried fraud and the term feindliches Angebot (hostile takeover) replaced "shareholder value" as the phrase of the moment in German business thought.

In fact, claim Krupp's advisers Goldman Sachs, Deutsche Bank and Dresdner Bank, this was not a hostile takeover, merely a fairly persuasive invitation to hold merger talks urgently. The banks believed that Thyssen would be won over by what they described as "compelling" arguments in favour of the deal, particularly as Thyssen's management had already expressed its belief in the principle of shareholder value.

But Thyssen's chief executive, Dieter Vogel, reacted in an unexpected way. Rather than negotiate, he chose the path of public resistance and quickly mobilized his workforce of 50,000 steelworkers against the act of alleged hostility.

Soon Vogel changed his mind, and began merger talks with Krupp's chief executive, Gerhard Cromme.

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