A court spokesman confirmed that a corresponding notification had been received. The company from Ellwangen announced on Sunday evening that it would be filing a restructuring plan in accordance with the Corporate Stabilization and Restructuring Act (StaRUG) at short notice. This is intended to permanently avert a possible insolvency of Varta.
In the fight for survival, Varta wants to force the old shareholders out of the company. In addition, creditors are to give up a large part of their money and their claims – among them, resistance to the company’s plans is already forming.
“The latest developments are making the situation for shareholders even worse,” commented analyst Michael Punzet of DZ Bank. “The intended financial repositioning of Varta AG is clearly at the expense of existing shareholders and creditors.” The expert reduced the fair value of the shares from 8 euros to 0 euros.
Tojner: “The decision was not easy for anyone”
“All alternatives were weighed up together with the management, and the decision was not an easy one for anyone. All reports and calculations have also come to this conclusion,” said majority owner Michael Tojner on Monday, according to a press release. “First, the basic problem of debt must be resolved. This decision involves severe cuts – I too will lose the entire value of my shares in the course of the restructuring that has now begun.”
The company, which has around 4,000 employees, has been struggling for some time. The once booming business with rechargeable lithium-ion button cells, including for wireless headphones, which were booming at the time, suffered a major setback due to cautious consumers and competition from Asia. The business with wall boxes for storing electricity, including for charging electric cars, also failed to gain momentum. The share price has been on a downward spiral for some time.
Price rose from 17.50 to 181.30 euros
In 2017, Varta was listed on the stock exchange for 17.50 euros and was in demand for a long time. At the beginning of 2021, the price had risen to 181.30 euros. Since then, however, it has been going down. On Monday, the shares last cost just 3.65 euros. The company’s market value was thus still around 155 million euros. Just over half of the shares are owned by Montana Tech Components, which in turn belongs to the chairman of the supervisory board, Tojner.
While Sunday’s announcement emphasized the safeguarding of jobs and the protection of creditors’ interests, it contained bitter news for existing shareholders: Both restructuring proposals submitted to the company provide for a simplified reduction of the company’s share capital to zero euros, combined with a subsequent capital increase with exclusion of subscription rights and the issue of new shares.
75 percent majority required
Since, in Varta’s estimation, the existing shareholders are unlikely to agree to the loss of their entire share package without compensation and to be completely forced out of the company with the required majority of 75 percent of the share capital present, the StaRUG should come into effect.
This stipulates that individual shareholders or creditors no longer have any rights in order not to endanger the existence of an operationally viable company. This would also involve a debt cut, which, according to the statement, the creditors would only agree to if the equity was reduced to zero.
Demand in the high double-digit million range
Varta has a financial need in the high double-digit million euro range. The involvement of financial creditors and investors is also planned to cover this. Negotiations are currently underway with, among others, the previous majority owner and chairman of the supervisory board, Tojner, and the German sports car manufacturer Porsche AG, which belongs to the Volkswagen Group. The latter had only announced at the beginning of the month that it wanted to buy the electric car battery business from Varta.
According to information from financial circles, major creditors are skeptical about the plan outlined today, as they would be excluded from the planned capital increase. The possibility of providing fresh money after the capital cut and thus continuing to be involved in the company would remain reserved for the current majority shareholder and Porsche. This contradicts fair equal treatment.
Creditors’ proposals not sufficiently appreciated
However, according to major creditors, this is a prerequisite for the StaRUG procedure to have any chance of success. According to the circles, the proposals made by the major creditors, which have been available for some time, have not yet been sufficiently appreciated. And this despite the fact that Varta boss Michael Ostermann assured the Reuters news agency on Sunday that he wanted to examine both proposals for the benefit of Varta.
The liabilities that Varta owes to large institutional lenders such as banks and hedge funds are said to involve a syndicated loan and promissory notes totaling almost half a billion euros. Creditors’ representatives are therefore hoping to be more closely involved in the planned rescue measures.
The analysis house Warburg Research has also lowered the price target for Varta shares to 0 euros in view of the impending capital cut and left the rating at “sell”. Analyst Robert-Jan van der Horst referred to the restructuring plan, which ultimately results in a total loss for the existing shareholders. According to Varta, the creditors are only prepared to give up a large part of their claims if the company’s share capital is reduced to zero euros.
