Interview with Dr Felix A. Zimmermann

The GEHE AG is spinning off its mail order division and then launching it on the stock market as an independent public limited company. Why?
(1999)

Question: Mr Zimmermann, the GEHE AG is spinning off its mail order division and then launching it on the stock market as an independent public limited company. Why?

Zimmermann: This ‘spin off’ process makes sense for a number of reasons. From a business point of view, there is no reason why we should continue to operate under the umbrella of the GEHE AG. In terms of logistics, there is no reason to do so either: there are virtually no synergetic effects. By spinning off this sector we are creating companies - so-called "pure plays" - which are each focused on their core competencies and have ample room for manoeuvre within their respective markets. Compared with KAISER + KRAFT being integrated into the structures of the GEHE AG this move also enables us to take much greater account of global strategies. The new development will give us a much wider scope. Being independent, we will make a greater impact and will be able to position ourselves much more effectively.

Question: What do you hope to achieve with this spin-off process?

Zimmermann: Mail order business has always been a highly profitable sector. We do not wish to rest on our laurels but we want to tackle the challenges which lie ahead on a systematic basis. We will continue to grow - in terms of both sales revenue and operating results. In order to achieve these objectives it is simply essential that we develop progressively into an independent global player and no longer operate just as a business unit of GEHE. Actually, we have more or less attained the status of a global player, but this new move will increase our strategic latitude to act, for example where possible acquisitions are concerned. All in all, the creation of an independent TAKKT AG will enable us to act with much greater flexibility, both internally and externally. At the same time, the process of separation will have considerable benefits for the GEHE AG which, like ourselves, will now be able to concentrate on its own business activities. Thus the spin-off will create a typical win-win situation.

Question: How do you view the role of the holding company?

Zimmermann: Our task will be to encourage an entrepreneurial spirit among the different subsidiaries. The TAKKT AG will manage the core competencies of the Group, i.e. mail order competence, logistics competence, customer competence and service competence. Of course, the holding company will also be able to make a greater impact among its suppliers. Our size alone will be a crucial strategic factor not only for our suppliers but for our customers as well. Thanks to our size and the optimal utilisation of synergies, we will be able to offer our customers the world's top products and services on a rapid and reliable basis. In addition, the holding company must ensure that the companies are well prepared for the future - for example, by maintaining the necessary resources of technical know-how. The Internet and e-commerce are therefore key areas of knowledge management. Moreover, further corporate acquisitions on the part of the holding company will contribute to the Group's growth.

Question: How would you describe your subsidiaries?

Zimmermann: All our subsidiaries have strong brands which achieve excellent product, customer and regional market coverage. All of them have achieved a high level of awareness and are a market leader in their particular field. Together we have a portfolio which can be described as unique with regard to product range, services and regional presence. Thanks to the diversity of our powerfully focused companies, we are able to operate globally as a specialist in terms of "depth" and as a general provider in terms of breadth of our product range and to utilise market potential to the full in all areas. Consequently, the attributes of our subsidiaries are not only service leadership, promptness, flexibility and product competence, but also the ability to complement one another within the framework of a powerful portfolio, which we aim to optimise together with the holding company.

Question: How will things change for the individual companies?

Zimmermann: We must see ourselves more strongly as a closely linked entity because our unity provides us with possibilities which are simply not available to the individual companies. This is not merely a matter of material factors such as increased financial resources, it is also and above all a question of improving the circulation of knowledge and intelligence above and beyond the limits of the Group. We must boost our efforts to establish a continuous and target-oriented transfer of know-how so that we can not only administer but also actively manage our talents.

Question: Earlier on you mentioned that the companies would now be able to position themselves better. What are the development trends in the mail order sector and how do you view the role of TAKKT?

Zimmermann: In future, the "traditional" mail order company will not be selling only products, but both products and processes, in other words: complete systems. The product will still be important, but the process which makes this product accessible to the customer will be at least equally important. I do not see ourselves as mail order retailers dispatching a product from A to B. We are much more than that. After all, we stand for business equipment solutions, in other words (system) solutions. Already today, the products which we market, i.e. the actual goods and the delivery service, are unique in terms of complexity and quality. With this, we are one step ahead our competitors. Today's customers want to deal with as few suppliers as possible. A different supplier for each product or group of products is no longer to their liking. Customers want to get as much as possible from a single source. This is a trend which will continue to grow - and we are well prepared to deal with it.

Question: Are you prepared for the future?

Zimmermann: We plan to expand the business-to-business sector with the addition of products and services to such a degree that customers will come to regard us as indispensable problem-solvers. We have already established ourselves as a strong partner for our clientele. And our complemented service will make us even stronger. That's what the customer is looking for. He wants to work with a fast, competent service provider. Because of our experience in the field of e-commerce, we will be able to further enhance our service. Our use of the Internet as a sales and marketing instrument allows our customers to select and order products with a previously never imagined degree of efficiency and flexibility. This is a value added factor which we already offer and which we plan to extend significantly. Beside the equipment solution we will provide e-commerce solutions to our customers. We aim to maintain the pioneering role which our companies have always played in the past. In fact, we are not only well prepared for the future: we are helping to shape the future.

Question: What are your growth targets? And how do you plan to achieve them?

Zimmermann: The mail order market for business equipment is expanding at a tremendous rate. The reason for this is the increasing importance of service. We have a major advantage over stationary retailers: as mail order retailers we can improve service and create an added value much more effectively than our "immobile" competitors. In the rapidly expanding business equipment mail order sector, the TAKKT AG aims to grow even faster than the market.

Question: Why should investors buy TAKKT shares?

Zimmermann: I see three main reasons.

Firstly, we are engaged in systems business - which we can expand to encompass not only new markets but also new products and groups of products. This is a highly complex process; however, our know-how permits us to adopt strategies which are simply not available to our competitors. This results in considerable potential for growth.

Secondly, we have an international structure and both the Group and the individual subsidiaries have a wide variety of products and services. Our corporate portfolio ranges from safety products, for example, to designer furniture. Both factors together - international character and a broad product range - ensure that we remain largely unaffected by the ups and downs of the economic cycle. Our business is therefore comparatively free of risk.

And thirdly, as a result of the increasing importance of e-commerce and virtual trading, our field of business is being revolutionised. As one of the trendsetters, we will be playing an active role in the development of the market. Briefly, our area of activity and our own business acumen hold out the prospect of strong growth and substantial earnings, with only a minor degree of risk involved.

Thanks to our know-how in the sphere of e-commerce, the outlook is distinctly bright: we have mastered the use of the Internet as a medium of sales and marketing and are playing our part in its dynamic development. At the same time, we have powerful, sharply focused brands which complement one another perfectly within our product portfolio.

Contacts:

Dr. Felix A. Zimmermann
Phone +49 (0)7 11.50 01-861