Hidden Billionaires Emerge With Retail Fortune in Germany

Hidden Billionaires Emerge With Retail Fortune in Germany

Four members of Germany’s Otto family, which controls Otto GmbH & Co KG, owner of the Crate & Barrel and bonprix retail chains, have surfaced as billionaires, based on a review of German regulatory filings. Benjamin Otto, 38, holds 12.5 percent of the business, which is also known as the Otto Group, making him one of the country’s youngest billionaires. He’s the son of Michael Otto, the 70-year-old chairman of the conglomerate, who controls 78.5 percent of company. The two have a combined fortune of $10.6 billion, according to the Bloomberg Billionaires Index.Maren Otto, the third wife of Michael Otto’s father, Werner, who founded the business in Hamburg in 1949, controls a separate real estate empire with her two children, Alexander Otto and Katharina Otto-Bernstein. They oversee almost 80 million square feet of U.S. office space and European shopping malls through three property entities.

The three have a combined net worth of $7.3 billion and have never appeared individually on an international wealth ranking.

“These families tend to dislike having their annual balance sheet published and open to the public,” Matthias Hoppe, a tax attorney at the Berlin office of Wilmer Cutler Pickering Hale & Dorr LLP, said in a phone interview. “It’s a measure of privacy.”

Otto Group had $15.5 billion in revenue and earnings before interest, taxes, depreciation and amortization of $964 million in 2012, according to its annual report.

‘Personally Liable’

Michael Otto controls the majority of the business through Kommanditgesellschaft Atlas Vermoegensverwaltung & Co., a Hamburg-based limited partnership, according to documents filed with the German Handelsregister. The billionaire, who was Otto Group’s chief executive officer until 2007, is the holding company’s general partner and, according to the documents, is personally accountable for its financial obligations.

“Michael Otto runs and controls the business,” Adrian Mueller-Helle, a partner at Berlin-based corporate law firm Wegner Ullrich Mueller-Heller, said in a phone interview. “He’s also personally liable. The other shareholders are the beneficiaries and take the profit.”

Otto Group is valued at about $11 billion, according to data compiled by Bloomberg. Retail accounted for 85 percent of Otto Group’s sales and 58 percent of Ebitda last year. That business is valued using the average enterprise value-to-sales and enterprise value-to-Ebitda multiples of four publicly traded peers: Fort Worth, Texas-based Pier 1 Imports Inc. (PIR), Leicester, U.K.-based Next Plc (NXT), Manchester, U.K.-based N Brown Group Plc (BWNG) and London-based Debenhams Plc. (DEB)

A 25 percent discount is applied because the retail division has a smaller Ebitda margin compared to its peers.

Real Estate

Robert Haegelen, a spokesman for the family, declined to comment on the calculation of the Ottos’ net worth.

Benjamin Otto heads an e-commerce business at Otto Group and controls his stake in the company through GFH Gesellschaft fuer Handelsbeteiligungen mbH. He has a net worth of $1.8 billion, according to the index.

The family controls its real estate assets through Hamburg-based Kommanditgesellschaft Cura Vermoegensverwaltung GmbH & Co. They own Hamburg-based ECE Projektmanagement GmbH & Co KG., and have interests in New York-based Paramount Group Inc. and Toronto-based Park Property Management Inc.

The real estate businesses are valued at $5.7 billion, according to a person familiar with the properties who asked not to be identified because the companies are closely held.

Nazi Prison

Alexander Otto, 46, the son of Werner and Maren Otto, has a bachelor’s degree and MBA from Harvard University. He’s served as ECE’s CEO since 2000, and is on the board of the Otto Group. He has a $4.5 billion fortune.

His 72-year-old mother has a net worth of $1.3 billion. She married Werner Otto, who was imprisoned in Berlin for two years for distributing anti-Hitler pamphlets before World War II, in 1963. He died in 2011 at age 102.

Their daughter, Katharina Otto-Bernstein, lives in New York with her husband, Nathan Bernstein, who owns an art gallery in the city’s Upper East Side neighborhood. The 49-year-old has a $1.5 billion fortune.

To contact the reporter on this story: David De Jong in New York at ddejong3@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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