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Rebel in a Bow Tie


Martin Ebner, Switzerland's most controversial and feared financier, occasionally likens himself to a medieval warrior, armed with a halberd. Foot soldiers using halberds--long, sinister-looking weapons fitted with an ax and pike--could pull knights off their horses and then finish them off. That's more or less what Ebner, the chairman of BZ Group Holding Ltd. and a champion of shareholder value, has been doing on the corporate front for the past 17 years. Ebner has made a fortune buying large stakes in some of Europe's biggest blue chips, then demanding that management shape up or face the consequences.

The consequences can be brutal indeed. In Ebner's latest foray, the tough Swiss shook up ABB (ABB), the huge engineering firm in which BZ Group has built up a 10% stake. Slow-moving ABB has lost 75% of its stock-market value over the past year, costing Ebner a fortune. Determined to rectify his error, an angry Ebner helped force out Chairman Percy Barnevik. Ebner then helped install new management, including Jurgen Dormann, longtime boss of drugmaker Aventis, to turn ABB around. Many investors think Ebner was one of those who leaked the news that ABB awarded Barnevik a secret severance package worth tens of millions of dollars. That revelation has caused an uproar in Corporate Europe. "Ebner has shaken up many leading companies," says St?phane Garelli, a professor at the IMD International Business School in Lausanne. "I doubt anyone likes getting a call saying he is buying up their stock."

But boardroom telephones have been ringing off the hook lately. In January, BZ announced that it had acquired a 20% stake in Swiss insurance company B?loise Holding, which is considered ripe for a takeover. Ebner is now expected to find an acquirer. And it is no longer just Swiss companies that Ebner is targeting. In recent years, BZ--or the investment funds it controls--has built up stakes in Swedish holding company Investor, Italian electronics giant Olivetti (OLVTY), Citigroup (C), and British bank HSBC (HBC). "Ebner is more active than ever," says Javier Lodeiro, an analyst at Bank Leu in Zurich.

The son of a print-shop worker who grew up in the lakeside town of Wilen, near Zurich, Ebner still lives there in an unostentatious house. Almost always pictured sporting a bow tie, the financier is said to be stubborn and distrustful of people he does not know well. Though he's probably a billionaire, Ebner eschews the flashy life of a tycoon. "He doesn't enjoy the high life and he doesn't flaunt his wealth," says a former business associate. Ebner, who seldom speaks to the press, except at BZ's annual January press conference, declined to be interviewed for this story. "He thinks an hour talking to a journalist is an hour wasted," says the former associate. "But he does court publicity when it suits his business interests."

BZ's major funds have consistently outperformed the Swiss stock market. And BZ's banking subsidiary, BZ Bank, which focuses on securities trading, reported a return on equity of 32% last year. Yet Ebner is roundly criticized as a cutthroat raider as interested in embarrassing the establishment as he is in making money. "He is ruthless when he sets a big company in his sights," says Andreas Reinhart, a financier who helped Ebner get established but then fell out with him over strategy.

Ebner does seem to have an ax to grind. After earning a law degree at the University of Zurich and a business doctorate at the University of Florida, Ebner joined Bank J. Vontobel & Co., the aristocratic private bank, where he rose to head the institutional investment advisory department. Ebner thought he should be CEO, but the Vontobel family wanted one of their own. Ebner quit to set up BZ in 1985.

Backed by a handful of European institutional investors and securities firms, BZ quickly made a name for itself in the staid world of Swiss finance. It became the first new firm to join the Zurich Stock Exchange in 20 years, then went on to capture 20% of total Zurich trading. From the start, BZ was an innovator. It created the market for covered warrants on Swiss equities and devised a range of other complex instruments that made the Swiss market more attractive to investors.

But BZ--a no-frills operation with just 30 employees, including Ebner's wife, Rosemarie, who acts as office manager--has been as controversial as it has been innovative. In 1988, Ebner made a daring attempt to acquire Bank Leu, Switzerland's fifth-largest, but lost out in the face of strong establishment opposition. Leu eventually fell to Credit Suisse. In the second half of the 1990s, Ebner's tactics in the battle to force Union Bank of Switzerland to improve its performance outraged many in Switzerland's tight-knit business circles. He embarrassed the board by lambasting their strategy at shareholders' meetings. It was the first time anyone could remember such a confrontation in Switzerland. "We literally thought he was mad," says a former member of the Union Bank board, who recalls having to work through the Easter holiday to ward off an Ebner assault. But confrontation works: When Union Bank rejected Ebner's demand to streamline its structure and cut costs, Ebner forced its sale in 1997 to the smaller but nimbler Swiss Bank Corp., thus forming the financial-services colossus UBS.

Ebner is a keen advocate of smaller government. In 1998, he once again ruffled feathers among Zurich's financial elite when he moved BZ to his native Wilen in the neighboring canton of Schwyz, which halved BZ's tax bill. Still convinced that his taxes were too high, Ebner demanded last year that Schwyz cut its taxes. After the canton refused, BZ distributed a pamphlet called "What every Schwyzer voter should know" that argued the case for a tax cut.

His colleagues defend Ebner. "[He's] not anti-establishment, he is just not part of the establishment," says economist Kurt Schiltknecht, who sits on the BZ Group board. Schiltknecht, who has known Ebner since they played ball together at school, thinks Ebner should be seen more as Switzerland's Warren Buffett than its Carl Icahn. "When he sees an investment isn't going well, he demands improvement," he says. "You can hardly say that's unreasonable."

Ebner's critics hope that he will get his comeuppance with ABB. They say he bought in at what he should have known was too high a price. Schiltknecht admits that BZ was "optimistic about the potential of ABB," but says that was because "we thought we had been given all the information we needed, which we hadn't." If Ebner fails to rejuvenate the conglomerate, he could lose up to $800 million.

Ebner may also be making a mistake in tangling with the Wallenberg clan, which dominates Investor, the Swedish holding company in which Ebner now has an 11.4% stake. Analysts reckon that the value of Ebner's Investor stake has already fallen by about $150 million. Still, Ebner is confident there is money to be made there. The Wallenbergs, says Schiltkecht, "will be forced to do something...[either] by buying back shares, shrinking the company, paying bigger dividends, or breaking the group up." Even when guilty of faulty judgment, Ebner always shows patience and cunning. After years of combat, Europe's corporate knights know to beware of Ebner's halberd. By David Fairlamb in Zurich


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