Vekselberg-Sulzer saga draws “Moscow threat”

Vekselberg has powerful allies

Moscow has threatened to damage Swiss business interests in Russia if billionaire Viktor Vekselberg loses his ongoing takeover battle with Sulzer, newspapers report.

The Swiss Federal Banking Commission is investigating whether the Russian oligarch together with Austrian investors broke market rules by acquiring a large stake in the engineering group.

Vekselberg’s private equity group Renova teamed up with Austrian company Victory Holding to suddenly snap up 32 per cent of Sulzer’s shares in a surprise raid in April.

But Sulzer claimed the raiders had used underhand methods to exploit loopholes in Swiss financial regulation, leading to the official investigation.

Furthermore, Sulzer chief executive Ulf Berg has refused to allow Vekselberg to list his shares on the company register thus excluding him from exercising voting rights.

Two Sunday newspapers report that former Russian Economy Minister German Gref responded by sending a letter to his Swiss counterpart Doris Leuthard in July threatening reprisals.

“Unfortunately, the Renova group’s investment situation sends a negative signal for the Russian economy and could undermine efforts by the Russian state to support foreign high-tech companies and their presence in Russia,” the SonntagsZeitung quotes from the letter.

The Swiss Economics Ministry confirmed to swissinfo that the letter had been received and that a response had been sent, but would not go into details.

Takeover fall-out

Renova and Victory have been causing jitters in Switzerland’s manufacturing and engineering sectors with a series of spectacular takeovers in the last two years.

Victory, owned by Austrian investors Ronny Pecik and Georg Stumpf, bought out technology firm Unaxis in 2005 and renamed it Oerlikon. Last September Victory integrated machinery manufacturer Saurer into the fold and also has minority stakes in telecommunications company Ascom and engineering groups Rieter and Georg Fischer.

Renova also owns a slice of Oerlikon and teamed up with Victory to snap up nearly a third of Sulzer under the banner of their jointly-owned enterprise Everest in April. However, Victory pulled out of Everest last month, leaving Vekselberg in sole charge of the Sulzer shares.

Both raiders have been criticised for exploiting a loophole that allowed them to build up large swathes of shares undetected. This loophole was closed with a revision of Swiss market regulations in July.

The Banking Commission has been kept busy by the activity and has also investigated the role of banks in the takeover deals.

The fallout claimed the jobs of Zurich Cantonal Bank (ZKB) chief executive Hans Vögeli, trading chief Markus Hofmann while investment banking head Hans Fischer resigned after “differences of opinion” over the bank’s trading strategy.

ZKB helped Everest acquire Sulzer shares while it was also acting as the engineering firm’s house bank.

swissinfo with agencies

In brief

Viktor Vekselberg is Russia’s fifth wealthiest individual, with a personal fortune of SFr8.1 billion ($6.52 billion) made in oil and aluminium. He lives in Switzerland and has recently bought a luxury apartment in Zurich.

Former Economics Minister Joseph Deiss signed a trade deal with Russian in January 2006 relating to market access to goods and services between the two countries.

According to the Zurich cantonal authorities, ten Russian firms set up in Switzerland last year with 20 others expressing an interest in the near future.

Russian direct inward investment has been accompanied by a rise in the number of Russians living in Switzerland. There are presently about 9,000 compared with 4,600 in 1995.

Russian tourists brought around SFr120 million into Switzerland last year.

Sulzer

Sulzer is active in machinery and equipment manufacturing as well as surface engineering.

It has a total workforce of about 10,400 in 120 locations around the world, including 1,200 in Switzerland.

Its core divisions are leading suppliers of the oil, gas, power generation as well as car and aerospace industries.

The company was founded in 1834 and its headquarters are in Winterthur, outside Zurich.

Business figures (2006): Net profit – SFr221.4 million. Sales – SFr2,801.7 million.