Staff and union slam Permira intervention at Hugo Boss
Mar 18, 2008
FRANKFURT (AFP) — Tension is growing at Hugo Boss against its new owner, the British investment fund Permira, with some accusing it of pillaging the German fashion retailer that has lost a top director and is set to lose another.
Supervisory board president Giuseppe Vita said Tuesday he would leave on June 30. His contract ran until 2010, but Vita said he planned to resign early "owing to a series of other commitments."
Permira thanked him for his work but did not appear too sorry to see him go.
"The search for a successor ... began some time ago. There is a list of promising candidates," it said in a German language statement.
When contacted by AFP, the company was not immediately able to comment in detail.
Permira bought more than 80 percent of Hugo Boss in mid 2007 after gaining control of its parent company, the Italian fashion house Valentino.
Since then two members of the Hugo Boss board have left, including its former boss, Bruno Saelzer, who quit in February and was followed a few week later by a second director.
Permira is expected now to try and place a candidate of its choosing at the head of the supervisory board, on which it already has five representatives, said Gert Bauer, a member of the IG Metall trade union who also sits on the board.
The question of Saelzer's successor is also open, but the selection of a new boss must be approved by the personnel, and Bauer said he was ready "to fight."
The head of the Hugo Boss workers' council, Antonio Simina, struck a combative tone as well.
"Permira must learn that you cannot do whatever you want with us," Simina told the German magazine Der Spiegel.
"If we must die, we will take a few with us into the grave."
The British fund had initially sought to establish good relations, saying it would respect the board's strategy and not fire workers after it took over.
Hedge funds are often accused in Germany of acting like "voracious locusts" that are prepared to pillage the companies they buy.
But the tone quickly soured and Saelzer had felt the need to point out that "in a company, it is still the board that defines the strategy."
Bauer said that Permira representatives had "come to tell us that they wanted a lot of money, to reduce their debt" after having spent more than three billion euros to buy the Valentino Group, "and that it was Hugo Boss that would carry the debt."
Permira wanted 800 million euros. In the end, it obtained in early March the payment of almost 450 million euros via a sharp increase in the company's dividend along with an exceptional payment of five euros per share.
The measure raised hackles at Hugo Boss, while some analysts cautioned that it could considerably increase the group's debt.
UniCredit analyst Volker Bosse said: "We welcome the extraordinary dividend as long as it is really just a one-off item."
But there is a strong possibility that Permira does not plan to stop there.
It has already rejected a request by IG Metall for a guarantee on the preservation of production sites and the company's shareholder equity.
Hugo Boss employs a total of 8,400 people.
For Bauer, there was no question of allowing Permira to dip again into the company's coffers.
"The payment of a strong dividend did not kill Hugo Boss, but it could become a problem if it continues," he said.
