German publishing group Axel Springer announced today it will stop funding its mail deliverysubsidiary PIN Group after MPs approved legislation to introduce obligatory minimum pay in the
postal sector with effect from January 1, 2008. An MBO now looks likely at the postal operator.As expected, the German parliament today overwhelmingly voted by 466 “yes” votes to 70 “novotes” to extend minimum wage legislation to the postal sector. German labour minister Olaf Scholzsaid the decision was “good news” for postal workers. The upper house will vote on the measure onDecember 20.
As a result, the agreement between the Deutsche Post-dominated Postal Employers Associationand Verdi trade union under which delivery staff should earn between EUR 9 and EUR 9.80 per hourwill be extended to all mail companies from January 1. From that date, Deutsche Post will lose itsremaining monopoly on domestic mail delivery, and the German mail market will be fully liberalised.PIN Group and TNT Post are the two leading private competitors to the national postal operator.
Just minutes later, Axel Springer, whose chief executive Mathias Döpfner had previouslywarned about the impact of the minimum wage legislation on the loss-making PIN Group, announced inresponse that it had decided to withhold further investment in the mail company. PIN Group, withabout 9,000 staff, already announced last week it planned to make about 1,000 staff redundant.
“With a legally prescribed minimum industry wage of 9.00 Euros in East Germany and 9.80 Eurosin West Germany, the burden on the cost of developing a business that is in a position tosuccessfully compete with Deutsche Post both regionally and nationally will be too high,” Springersaid. Deutsche Post would continue to benefit from VAT exemption while competitors would be forcedto increase their operating costs.
As the majority shareholder of the PIN Group (63.7%), Springer had already invested more thanEUR 620 million in the company over the last two years to build up the largest private postaloperator in Germany. None of the minority shareholders, including the Holtzbrinck, WAZ and Madsackpublishing groups and Rosalia AG/PIN Group CEO Günter Thiel, are currently willing to provide anyfurther funds, it added.
“Axel Springer AG is prepared to dilute its holding and surrender its controlling interest inthe PIN Group, if minority shareholders and new investors provide sufficient funding to give thePIN Group an economic perspective in a new positioning,” the company declared.
In response, PIN Group CEO Günter Thiel issued a statement saying he and other managers wereprepared to take over Springer’s holding in the company under a management buy-out and invest adouble-digit million euro sum into the company. Talks would start today on the issue, and Springermight be prepared to remain as a minority shareholder, he said.
“Under the new circumstances, continuation of the PIN Group is possible under very difficultconditions. The management and shareholders remain convinced about the company’s business model andsuccess,” Thiel stated. He reiterated his call for Deutsche Post’s VAT exemption to be ended inorder to ensure fairer competitive conditions.
According to media reports, PIN is considering focusing on business customers and majorcities in future, and may withdraw from regional deliveries and private customers.
