Grenke: More thoughts on Related Parties, Cash and the “Brink”-Problem

Matthias MeitnerManaging Partner, VALUESQUE

In our most recent blog post we have already given some first comments on the Viceroy-Grenke-case HERE. We think some more points are worth commenting, in particular to remind everybody that – despite the fact that we see most of the accusations as highly overdone – this short-seller attack is not something to take lightly.

  1. Related Parties

The question of whether the franchise businesses fall under the scope of IAS 24 Related Party Disclosure was already discussed in our former blog post. Due to new information from a press release yesterday (“Wolfgang Grenke comments on the franchise system of GRENKE AG”, 17 September 2020) we have to revisit this issue.

In the press release, Grenke explained again that Mr. Grenke did not have ownership or control of CTP Handels- und Beteiligungs GmbH, the investment vehicle that took equity stakes during the foundation phase of the franchise companies. This supports the non-related-party assumption. However, it is also written in the release that since 2014 Garuna AG also took minority stakes in franchise firms and that “The shares in Garuna AG are held by a personal confidant of Mr. Grenke, Ms. Corina Stingaciu, as the beneficial owner.” We do not know exactly who Ms. Stingaciu is (memyselfandi007 speculates – really only speculates – that she could be the girlfriend of Mr. Grenke HERE) , but being a ‘personal confidant’ of the CEO is a tricky thing in terms of related parties, anyway. Again, according to IAS 24.9, related party is “A person or a close member of that person’s family is related to a reporting entity if that person: (i) has control or joint control over the reporting entity; (ii) has significant influence over the reporting entity; or (iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.” By the words, it seems that Ms. Stingaciu does not fulfil the requirements of IAS 24.9 – even ‘significant influence’ is presumably not relevant here. But with personal relationships things are never really clear. This one remains very tricky. Perhaps disclosure on related party transactions might have been mandatory here.

Anyway, regarding this whole construct we think the questions raised by memyselfandi007 to be addressed to the management. We have rewritten them here below (Source: Grenke – Quick take on the first statement from W. Grenke, LINK):

  • who were the old owners of CTP ?
  • did CTP invest in anything else than Grenke franchises ?
  • What profits did CTP make over the last 5,10,15 years being a PE company from selling Grenke franchises ?
  • what was the transaction price for Mr. Grenke ? (Important !!)
  • what did Mrs. Stingaciu pay via Garuna for her stake in the franchises ? Did she pay at all ?
  1. Cash

One point of Viceroy accusations relates to the high cash amount on the balance sheet which – according to Viceroy – stand in contrast to Grenke’s regular financing activities at capital markets. However, we have looked at the cash and cash equivalents position (1,077,981 Euro at the end of Q2/2020) in more detail and could not find that the sheer amount is particularly high.