Dynasty Divided Family Feud Snarls Aldi

A power struggle within the secretive dynasty behind the world’s largest discount supermarket chain is playing out in court. In his first media interview, Aldi heir Theo Albrecht Jr. told Handelsblatt that the grocery giant’s future is in jeopardy.
What's in store for Aldi?

The world’s largest discount supermarket chain, Aldi, is embroiled in a family feud that could jeopardize the far-flung empire, the company’s heir has warned in his first ever interview.

Theo Albrecht Jr., the reclusive Aldi heir and Germany’s second-richest man, broke decades of public silence, telling Handelsblatt that a legal spat with his sister-in-law, Babette Albrecht, over management control of the company was a serious strain on the family-owned company and that it would make his brother "turn in his grave."

My sister-in-law's behavior in public, which is sometimes embarrassing, as well as the many lawsuits she is involved in are a burden for our company,” Mr. Albrecht said. The withdrawals by her and her adult children of millions of euros from the foundation that holds some of the family's shares in Aldi could “damage the company’s reputation,” he said.

My brother would be turning in his grave if he knew what was happening here. Theo Albrecht Jr., Aldi heir

Mr. Albrecht is appealing against a court decision in February that allowed Babette Albrecht, the widow of Mr. Albrecht’s late brother Berthold, to install two of her daughters on the board of the Jakobus Foundation.

The foundation, one of three that hold family stakes in the retail giant, is where Berthold Albrecht placed his 19.5-percent stake in Aldi Nord, the northern branch of the Aldi empire formerly controlled by his father, company co-founder Theo Albrecht Sr.

The Aldi empire grew from a corner shop inherited after World War II by Theo Albrecht Sr. and his brother Karl. In 1961 they decided to split the company in two, Aldi Nord under Theo senior covering the north of Germany and Aldi Süd under Karl covering the south. The firms grew rapidly with their pioneering discount model of low-cost food sold through no-frills outlets. The two companies  are separate and independent entitities but they coordinate their business. Both patriarchs have died. The current legal spat affects only Aldi Nord.

The court in Schleswig, in northern Germany, enabled the daughters of the late Berthold Albrecht to gain membership on the Jakobus Foundation’s board by nullifying a December 2010 amendment signed by their father to lessen the family's influence in the running of the company.

“My brother would be turning in his grave if he knew what was happening here,” said Mr. Albrecht.

 

02 p6 The Aldi Empire-01

 

Together, the Jakobus, Markus and Lukas foundations hold billions of euros of Aldi Nord assets that support the Albrecht family and finance investments in the business. Theo Albrecht Jr.’s 19.5 stake rests in the Lukas Foundation, which he founded, while the remaining 61 percent belonging to him and his mother, Cilly Albrecht, are invested in the Markus Foundation.

Aldi Nord and Aldi Süd operate nearly 10,000 stores in 18 countries and generate estimated annual revenues of more than €50 billion ($56 billion). Among its international holdings, Aldi Nord owns the Trader Joe’s discount grocery chain in the United States.

Mr. Albrecht, 66, said he was concerned that if the court’s decision held, his nieces, together with their lawyer, would be able to hold the company to ransom by controlling the flow of money needed to pay for foreign expansion, for example. "They would then have unlimited potential to blackmail the company,” he said.

Babette Albrecht and her five daughters deny that accusation. Court documents show they have yet to block a major decision by the company. Instead, they recently approved a €127-million capital increase.

But Mr. Albrecht warned that the uncertainty over the company’s leadership comes at a time when competitors such as Lidl are expanding and modernizing their stores.

“Our store network in France is urgently in need of renovation, and stores in Denmark also need to be modernized,” he said. The stores in Germany had recently been modernized but they had to be constantly improved. “Standing still means falling behind,” he cautioned. “This is about the future of the company.”

Recent media attention and public discussion of family secrets stands in stark contrast to the low public profile the Albrecht clan had maintained for decades.

The legal dispute began in late December 2012, about one month after the death of Mr. Albrecht's younger brother Berthold. That’s when Aldi attorney Emil Huber, whom the deceased named executor of his will, met with the widow and her five children at the family’s villa in Essen, in the northwestern German state of North Rhine-Westphalia.

Mr. Huber presented a 12-page memorandum of understanding, based on his interpretation of the will, which Babette Albrecht and her children must have viewed as pure provocation. It obligated Mr. Albrecht’s children to satisfy “the demands of a good role model” and to conduct their lives, at least in public view, in line with the company’s guiding principles.

They rejected the document and retained a lawyer of their own.

In his handwritten will dated June 2, 2008, the late Mr. Albrecht names his children as heirs and assigns his wife property – including valuable art, collectable cars and the family villa – with an estimated value in the triple digit millions of euros.

But the will included conditions with substantial ambiguity and room for interpretation.

On the one hand, it ordered inheritance payments to his children to be withheld until they turn 33 and named Mr. Huber as will executor until the youngest of his children reached the age of 39, which occurs in 2030. Yet it also stated that the Jakobs Foundation board can approve payments to his children at any time, when justified.

The discord escalated when Mr. Huber demanded €4.5 million in his first year as will executor and €500,000 per year until 2030. The will, however, states that the executor had agreed to provide his services free of charge – a claim that sources close to Mr. Huber denied.

In a court filing, Babette Albrecht called Mr. Huber’s demand “completely excessive.”

 

02 p6 Aldi on Three Continents-01

 

At the center of Mr. Albrecht’s pending appeal in a higher administrative court is control over the Jakobus Foundation board.

When Berthold Albrecht created the board with up to five members, he stipulated that it should contain one member from Aldi Nord's management board and one member who was either a lawyer or a business consultant. Up to three other members should be family members.

The Lukas and Markus foundations maintained the same board structure until family patriarch Theo Albrecht Sr. passed away in July 2010. Shortly thereafter, in December 2010, his two sons amended the three foundation charters to rebalance the makeup of the boards with two members from the company and two from the family.

That amendment no longer applies, as per the February 18 court decision, which Mr. Albrecht views as a threat to the company.

“The purpose of the charter is to protect the company from too much family influence. That's what I'm fighting for,” Mr. Albrecht told Handelsblatt. “After my father’s death, we had to change our way of thinking.”

In court filings, he argued that the change in board makeup was “carefully planned” and “equally desired” by him and his brother.

But his brother’s widow, Babette, argued that her husband was so ill and hospitalized at the time he signed the amendment that he could not have understood its significance. The lower court agreed, invalidating the change and rebalancing the board in the family’s favor.

In the wake of the court decision, the positions of the two sisters on the Jakobus Foundation board are legally secured – pending their uncle’s appeal in the higher court. In the meantime, they have replaced Mr. Huber with their own lawyer, Andreas Urban, on the board.

The power struggle could influence the future of the Aldi Nord empire which has lagged behind Aldi Süd in terms of retail innovations and the attractiveness of its German stores in recent years.

In addition, they have awarded themselves, their siblings and their mother a total of €75 million in payments from the foundation over the last three years.

Mr. Albrecht had also offered them €25 million per year to settle out of court. His goal was “to put an end to pending litigation and get our company out of the headlines.” Attached to his settlement offer were two conditions: that the company continues to perform well financially and that his in-laws agree to the 2010 charter amendment limiting their control.

But the opposite has happened, Mr. Albrecht said.

“The company representatives haven't been consulted at all yet,” he said. “No resolutions at all have been made with the involvement of the two company representatives.”

Since the dispute erupted, the secretive Albrecht dynasty has been in open conflict in a supermarket soap opera pitting Theo Albrecht Jr., his 88-year-old mother and their attorney Mr. Huber against Berthold Albrecht’s widow and children, and their attorney Mr. Urban.

Recent media attention and public discussion of family secrets stands in stark contrast to the low public profile the Albrecht clan had maintained for decades after Theo Albrecht Sr. was kidnapped in 1971 and held for more than two weeks. The event precipitated the creation of the foundation structure. The only public photo of Theo Albrecht Jr. is believed to be 20 years old.

Germany’s Bild newspaper recently reported that his wife and daughter had left him for reasons related to company matters. It didn't provide any evidence to back up the story. It also alleged that Cilly Albrecht preferred to play bridge at a golf club rather than attend her son’s funeral -- an allegation she has vehemently denied. But it's true that neither Cilly Albrecht nor Theo Albrecht Jr. came to Berthold Albrecht's funeral in 2012. Babette Albrecht refuses to this day to reveal the location of her husband’s urn to them.

The power struggle could influence the future of the Aldi Nord empire which has lagged behind Aldi Süd in terms of retail  innovations and the attractiveness of its German stores in recent years. Aldi Nord's revenues in 2014 totalled some €29.4 billion, compared with Aldi Süd's €42.6 billion. The foundations finance the investments of the discount giant, and Aldi Nord needs to sharply increase its spending on store refits.

 

Jan Keuchel writes about investigations and the legal system for Handelsblatt. Florian Kolf leads Handelsblatt's coverage of the retail sector. To contact the authors: [email protected],  [email protected]