Metallgesellschaft AG was formerly one of Germany's largest industrial conglomerates based in Frankfurt. It had over 20,000 employees and revenues in excess of 10 billion US dollars. It had over 250 subsidiaries specializing in mining, specialty chemicals (Chemetall), commodity trading, financial services, and engineering (Lurgi).Henry Merton & Company, Ltd was previously a branch of the Metallgesellschaft.[1]
History
Metallgesellschaft AG was incorporated in Frankfurt am Main in 1881 by Wilhelm Ralph Merton, his father Ralph Merton, and Leo Ellinger.[2] Merton was responsible for business strategy, Ellinger for operations, and a cousin of Merton, Zachary Hochschild, for marketing and international activities.[2] Their main
competitors
were the two other large metal trading companies of Germany:
In 1989 Michael Farmer, Baron Farmer formed the Metal & Commodity Company Ltd trading company, a subsidiary of Metallgesellschaft AG, which became the world’s largest trader in physical copper and nickel, and he was its CEO from 1989-2000.[6] In 1999 the company went public as it was floated on the London Stock Exchange under the title MG Plc with Farmer as its co-CEO; it was the first metals trader to be listed on the exchange.[7][8][9][10] In 2000 he sold it to trading company Enron for $448 million, and Enron renamed it Enron Metals (in 2002, Enron sold the firm, which is now called Sempra Metals, and based in London).[7][6][11]
Hedging debacle
In 1993, the company lost 1.3 billion dollars[12] suffering from flawed long hedge strategy in near term futures contracts that was meant to protect against forward sales commitments.A fall in spot prices forced margin calls for the company and the contracts were closed at a loss. Subsequently, the spot price increased and the company suffered even greater losses covering its customer commitments.
It is debated whether the company was speculating after unwinding the long futures hedge since they became essentially exposed or naked against their forward customer commitments. It also became involved in a key European Court of Justice case (based on the tax treatment of dividends) that was heard at the same time as Hoechst.
The company is now part of GEA Group Aktiengesellschaft.
