Wyser-Pratte and Vendex - "Rhenian Capitalism" at Risk?

The Netherlands has sometimes been called "the Delaware of Europe", due to management-friendly corporate governance laws. Its generally flexible tax policies and other features have attracted many foreign-based corporations. But when top financier Guy Wyser-Pratte set his sights on acquiring Royal Vendex KBB, Holland's largest non-food retailer, many saw it as neo-liberal, Anglo-American-style capitalism confronting the more corporatist approach common to continental northern Europe, often referred to as "Rhenan capitalism." The Paul Desmarais Chaired Professor of Partnership and Active Ownership Philippe Haspeslagh recounts the clash of values Wyser-Pratte represented with his manoeuvring.

by Philippe Haspeslagh
Last Updated: 23 Jul 2013

The Netherlands has sometimes been called "the Delaware of Europe", due to management-friendly corporate governance laws. Its generally flexible tax policies and other features have attracted many foreign-based corporations. Guy Wyser-Pratte, however, dismissed his homeland as "the banana republic of corporate governance". The financier and corporate governance advocate had earned himself a reputation as a shrewd operator who knew how to "sort out" under-performing companies. He set his sights on acquiring Royal Vendex KBB, Holland's largest non-food retailer, but felt tethered by its convoluted ownership structure so typical of large Dutch companies.

His attempts to provoke Vendex's board to alter its stakeholders structure is a remarkable example of neo-liberal, Anglo-American-style capitalism confronting a more corporatist approach common to continental northern Europe, often referred to as "Rhenan capitalism."

While Wyser-Pratte may have railed against what he saw as a stolid, anti-competitive national corporate culture that cosseted firms against the benefits of a free market, the Dutch business community prided itself on having a superior system of checks and balances. By law, corporations were expected to be managed in the interests of the company as a whole, not simply their shareholders. Wyser-Pratte's first objective was to alter Vendex's anti-takeover structure by convincing its board to afford shareholders the right to affect changes in management. The (A) case ends with a description of his victory.

(B) Case: After victory, setbacks and conflict

Having won many concessions in their battle for increased shareholder rights, Wyser-Pratte and a coalition of active investors attempted to leverage their newfound powers to affect the strategic direction of Vendex, which has dropped 30% in market capitalisation in the past year.

But Wyser-Pratte's views of the best strategy for the company soon differed substantially from those of most of Vendex's senior managers. A coalition of large investors, led by the financier, decided to hire top advisors to bolster their position that Vendex should forget about major investments in the short term. Rather, they advocated divesting several subsidiaries and launching a share buy-back.

As he had done so successfully in changing the company's original shareholder structure, Wyser-Pratte chose a shareholder meeting as the forum for putting critical questions to the board. A major shareholder decided to employ its own financial advisors to form questions to put to Vendex's board. What would its response be?

INSEAD 2004

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