November 17, 2008 / 7:01 PM / 10 years ago

UPDATE 1-Ratiopharm owner Merckle lost on VW bets

* Merckle’s VEM investment vehicle held VW put options

* Merckle son says VEM suffered in financial crisis

* In advanced talks with banks to stabilise situation

(Adds comments from Merckle statement)

FRANKFURT, Nov 17 (Reuters) - German billionaire Adolf Merckle was among investors caught on the wrong foot by an unprecedented surge in carmaker Volkswagen’s (VOWG.DE) shares, Merckle’s son Ludwig Merckle said on Monday. The losses, which according to a banking source familiar with the matter amounted to 400 million euros ($507 million), fuelled speculation that the industrialist could sell generic drug company Ratiopharm or part of his stake in HeidelbergCement (HEIG.DE).

Ludwig Merckle, who manages VEM Vermögensverwaltung, one of the family’s investment vehicles, did not comment on such speculation, but said that VEM had suffered as a result of the severe turbulence on financial markets in the past couple of weeks.

VEM held VW put options, he said.

He added that talks with banks to “stabilise the situation” were at an advanced stage and that different options were being examined.

VEM holds around 25 percent in HeidelbergCement, in which the Merckle family in total owns more than 80 percent, and all of Ratiopharm, which had 1.8 billion euros in sales in 2007.

On Friday, Handelsblatt newspaper cited banking and industry sources as saying Merckle was mulling a sale of Ratiopharm, the world’s fourth-largest generics company, to inject new capital into HeidelbergCement.

Financial Times Deutschland reported he may be considering selling part of his stake in the cement maker to offset the losses made on Volkswagen stock.

Frankfurter Allgemeine Zeitung (FAZ) said Merckle lost about 1 billion euros in transactions related to VW and other stocks on the German benchmark DAX index .GDAXI last month.

Meanwhile, The Financial Times reported Merckle was in talks with a group of about 40 banks to arrange a bridging loan.

A massive short squeeze briefly made Germany’s VW the world’s most valuable company in late October, when its share price rocketed to just over 1,000 euros from 210 euros in two trading sessions.

The rise was prompted by controlling shareholder Porsche (PSHG_p.DE) saying it had effective control of 74.1 percent of VW, leaving index-tracking funds and investors that had shorted VW scrambling for shares.

Rating agencies’ recent downgrade of HeidelbergCement’s corporate credit to “junk” status has focused market attention on the world’s fourth-largest cement maker, heavily indebted following its 14 billion-euro purchase of Hanson in 2007.

HeidelbergCement said this month the downgrade and strained financial markets restricted its ability to refinance, though it noted it had sufficient unused confirmed credit lines available.

Shares in HeidelbergCement closed down 21.9 percent at 39.90 euros, while the German mid-cap index .MDAXI ended 2.2 percent lower. (Reporting by Frank Siebelt, writing by Ludwig Burger; Editing by Jon Loades-Carter and David Cowell)

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