Tönnies Meats Getting Down to the Marrow

After years of dispute over the management of their meat empire, family members Clemens and Robert Tönnies are now negotiating a compromise.
A fresh start for the Tönnies family.

Another family feud looks set to come to an end in Germany's corporate world, Handelsblatt has learned.

After a bitter four-year dispute, there are signs of conciliation between Robert and Clemens Tönnies, the combustible uncle and nephew team that leads Germany's largest meat producer of the same family name.

The two Tönnies family members may be finally reaching a compromise over who gets to lead the company, ending a court-room drama that has long distracted this major meat producer, which last year reported revenues of €5.6 billion, or $6.3 billion, and had a workforce of 8,000 people.

Such a reconciliation looked unlikely in April, when Clemens Tönnies in court slammed his fist on the table and asked, "Robert Tönnies, are you crazy?" Robert, for his part, has accused his uncle of ingratitude and incompetence.

Now, according to sources from Handelsblatt and Neuer Osnabrücker Zeitung, the two parties are in constructive talks to end the crisis. The plan is to set a jointly-controlled holding company – with neither feuding family member in charge of the day-to-day running of the Tönnes Group.

I'm hopeful that we will resolve this.

Family feuds like the Tönnies are quite common in Germany, where many even large business empires are still family-owned rather than listed on stock exchanges. This is especially true of the retail sector – think of the Aldi supermarket chain. The trouble often comes at the handover. Every 20 years or so, the risk of a succession feuds breaking out among family members becomes real.

When contacted by Handelsblatt and Neue Osnabrücker Zeitung, Clemens Tönnies confirmed that talks with his nephew were underway. "I'm hopeful that we will resolve this," he said.

A spokesman for Robert Tönnies was unwilling to confirm or comment on the talks.

Under the compromise, Clemens Tönnies could withdraw from the current management of the Tönnies Group. A family holding company would be formed to control the group, with Robert and Clemens each owning 50 percent.

The compromise would resolve the dispute over who is entitled to run the group. Clemens Tönnies is currently in charge, but Robert took him to court to challenge his position.

 

161 Toennies WTB 2013

 

The long-running court battle has been one of deep intrigue, complete with accusations of backstabbing and back-room deals that would make any family blush.

Robert's father, Bernd Tönnies, founded the company in 1971 and made his younger brother Clemens a junior partner a few years later. Clemens paid 200,000 deutsche marks at the time, about €100,000, for a 40-percent share of the company.

When Clemens testified in court, he said that he had worked seven days a week. "And why? Because we came from squalor." The parents' slaughterhouse had been so unprofitable initially, he said, that his mother was often reduced to tears.

Clemens had quickly become dissatisfied with the role of junior partner and demanded equal treatment from his brother, who allegedly promised in 1988 to grant him 50 percent of shares in the company. But then, with the fall of the Berlin Wall and Germany in the midst of reunification, other tasks were prioritized. Still, Clemens Tönnies said, it was clear that the shares would eventually be transferred once the dust had settled.

When Bernd Tönnies died in 1994, the shares had still not been transferred. His two sons inherited his 60-percent share of the company instead. The older son, Clemens Junior, was ill, so Robert Tönnies owns all the shares today.

This didn't suit Clemens. Although he only owned a minority share in the company, Clemens Tönnies in 2002 took steps to put himself in charge.

He invited the two young heirs to his house and had them sign a document that granted him double voting rights. Then, in 2009, he convinced each of the two brothers to give him an additional five percent of the company, telling them that it was what their father had wanted.

After 20 years, he had finally achieved his goal. He owned half of the company and, thanks to his double voting rights, was also in charge.

In court, Robert Tönnies said that the family peace was destroyed when he discovered his uncle had made secret deals behind his back. According to Robert, Clemens had acquired a competitor, the zur Mühlen Group, a sausage manufacturer, and had expedited expansion into Russia on his own. He had also set up a foundation in Luxembourg to hide certain aspects of the company.

This was all allegedly to the detriment of his co-owner Robert, who claimed that he had only learned of his uncle's secret activities after making his own inquiries.

Even though the value of his shares kept rising, this information apparently led Robert Tönnies to question his uncle's integrity. He felt deceived. He accused his uncle of gross ingratitude, which, under German law, entitles an owner to revoke a gift.

He also conducted additional research to support his accusations, which led him to believe that his father's alleged promise to Clemens was not as clear as had been claimed.

In court, witnesses testified that they clearly remembered Clemens Tönnies' determination to reach 50 percent ownership in the company. But it was debatable how serious the brother was about granting him equal ownership.

Clemens apparently applied pressure on his brother by threatening to leave the business. Witnesses said that there were frequent arguments.

Robert's attorneys argued the fact that Bernd still had not taken action suggested that he was not willing to do so.

Clemens contested this, arguing that the circumstances had prevented the transfer from taking place. According to Clemens, actually buying the additional shares was never a consideration, because he had increased the value of the company with his successful work.

 

Quelle: dpa
Signs of reconciliation.
(Source: dpa)

 

During the trial, it was difficult for Clemens Tönnies to convince the judge why his brother had not completed the necessary steps to make him an equal partner for years. Also, while he seemed more eloquent than his adversary, the mudslinging raised doubts as to his good intentions.

The judge was also unconvinced that the transfer of 10 percent of the group was indeed supposed to occur without payment. Clemens stressed that his success in steering the company was compensation enough.

Questions would remain over whether Clemens served up his nephew with at least a sugarcoated version of the truth. But it was also clear that it would be even more difficult for Robert Tönnies to prove that the promise, which he hadn't initially questioned, had never existed.

Robert Tönnies' attorneys therefore argued that Clemens Tönnies had shown ingratitude by building shadow companies, which justified revoking the gift.

Robert Tönnies has already won another case – revoking the double voting rights that Clemens Tönnies had obtained from his nephews in 2002.

The judge, reviewing the facts of the case, concluded that Clemens had become confused by the tangle of companies he had created. Instead of  obtaining the double voting rights for a newly created holding company, he had only obtained them for one of its subsidiaries, meaning the rights were invalid for the entire Tönnies Group.

The bad blood between these two family members could still torpedo a deal. Hurdles remain after years of insults, bans from the premises, and the release of financial statements that were not approved by both sides.

A lengthy legal dispute had looked likely, if not legal deadlock. But if the two co-owners do manage to reach an agreement, this risk at least will have been contained.

 

Christoph Kapalschinksi covers the consumer goods sector, Anja Müller writes about family-owned companies and mid-sized firms, Burkhard Ewert writes about Internet and new economy. To contact the authors: [email protected], [email protected], [email protected]