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Morgan Stanley Germany head steps aside in email row

Source : REUTERS
Last Updated: Mon, Jun 25, 2012 18:00 hrs

FRANKFURT (Reuters) - The head of Morgan Stanley's German unit, one of the country's best-connected dealmakers, has been granted leave of absence by the bank following an uproar over emails he reportedly exchanged with a regional politician.

Dirk Notheis, 44, has run the U.S. investment bank's operations in Germany and Austria for more than three years, earning a reputation as an aggressive banker with close ties to Chancellor Angela Merkel's ruling conservatives.

He came under fire in the past week after German newspapers published copies of emails Notheis reportedly sent to the premier of Baden-Wuerttemberg in 2010, when the southwestern state was trying to purchase a stake in local utility EnBW from French energy group EDF.

In the emails, which could not be independently verified by Reuters, Notheis casually refers to Merkel as "Mutti", German for "mom", and sometimes appears to be ordering around regional leader Stefan Mappus, who like the banker is a member of Merkel's Christian Democratic Union (CDU).

The reports sparked a wave of criticism, in part because it highlighted the cosy relationship between bankers and politicians at a time when many Germans are up in arms about the role banks have played in the global financial and euro-zone debt crises.

"Dirk Notheis has informed the supervisory board that he will take a leave of absence," a Morgan Stanley spokeswoman said on Monday, a day after Reuters reported that Notheis had tendered his resignation.

The spokeswoman said Notheis's responsibilities as country head for Germany and Austria would be taken over by supervisory board chairman Lutz Raettig, who is well known in the Frankfurt financial scene and served as Morgan Stanley's country head from 1995 to 2005.

The bank also retains the services of Christian Zorn and Johannes Groeller, who have been co-heads of investment banking for Germany and Austria since Notheis was elevated to his role as head of Germany back in 2009.

The move is nonetheless a blow for the U.S. investment bank, which had come to rely heavily on Notheis and his political connections to deliver lucrative advisory roles or mandates in merger and acquisition deals.

Morgan Stanley has won some big mandates from companies in which Germany retains an equity stake.

It was for example co-bookrunner for Commerzbank's 11 billion euro rights issue, was adviser to Deutsche Telekom's aborted $39 billion sale of T-Mobile USA to AT&T and was bookrunner for Deutsche Post DHL on a 750 million euro exchangeable bond for state-controlled development bank KFW.

COMEBACK UNCERTAIN

It was not clear when or if Notheis would resume his responsibilities, people familiar with the situation said.

The negative publicity could make it harder for Notheis to operate in Berlin political circles, where discretion is a key prerequisite to gaining high-level access.

Furthermore, the political firestorm and publicity about the EnBW deal will likely continue for years, thanks to an arbitration procedure reviewing the deal initiated by Baden-Wuerttemberg.

The reported Notheis emails touched on efforts by Baden-Wuerttemberg to acquire a 45 percent stake in local utility EnBW from EDF. Notheis appears to give Mappus advice on how to limit time for political debate on a renationalisation of EnBW.

"Call a confidential meeting at the state ministry with three politicians but without the supervisory board chairman, initially without giving a reason," one of the emails supposedly from Notheis to Mappus published in Handelsblatt reads.

He says Merkel's assistance will be needed to persuade the EDF to sell and suggests Mappus should meet with then French President Nicolas Sarkozy. "Ask Mutti if she can arrange that," Notheis reportedly wrote.

Baden-Wuerttemberg eventually bought the EnBW stake in December 2010 for about 4.7 billion euros. But the state has since launched a probe into the deal and sued EDF, saying it overpaid to the tune of 2 billion euros.

Morgan Stanley was reported to have provided the emails to the state government as part of the probe.

Asked about the case on Monday, Merkel's spokesman Steffen Seibert said Berlin had not been involved in the EnBW talks and therefore could not comment on them.

"The negotiations on the purchase of EnBW stake by the regional government of Baden-Wuerttemberg were handled by the regional government. Therefore, the federal government has no knowledge of the details of these negotiations," Seibert said.

In Germany, Morgan Stanley ranked second behind Deutsche Bank and ahead of U.S. rival Goldman Sachs in mergers and acquisitions rankings in the year-to-date, measured by overall deal value, Thomson Reuters data show.

In terms of M&A fees earned from completed deals, Morgan Stanley ranked in third place, earning $8.6 million, lagging behind Lazard and Citi. Fees from deals with German involvement totalled $233.2 million so far in 2012.

This year Morgan Stanley has advised SAP on its acquisition of Ariba Inc, Outokumpu on its acquisition of ThyssenKrupp AG's Stainless division, and EQT on buying BSN Medical.

(Reporting by Philipp Halstrick, Edward Taylor, Jonathan Gould, Gernot Heller; Writing by Noah Barkin)




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