How Preussag Became TUI: A Clinical Study of Institutional Blockholders and Restructuring in Europe |
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| Authors: | Ingolf Dittmann Ernst Maug† Christoph Schneider‡ |
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| Institution: | Ingolf Dittmann is Professor of Corporate Governance at Erasmus University Rotterdam, Netherlands;Ernst Maug is Professor of Corporate Finance at the University of Mannheim, Germany;Christoph Schneider is PhD Student in Finance at the University of Mannheim, Germany |
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| Abstract: | Between 1997 and 2004, Preussag, a diversified German conglomerate of "old economy" businesses, transformed itself into TUI, a company focused almost entirely on tourism and logistics. We analyze how Preussag executed this change, and how the change contributed to Preussag's underperformance in the stock market. 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. The case shows how divestiture programs increase the liquid resources available to management and casts doubt on the positive governance role of institutional blockholders. |
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