HedgeCo.Net (New York) – Two US hedge funds, K Capital and M2 have recently revealed that they own more than 16% of Europe’s largest film processing company Cewe Color. Inan unexpected move the hedge funds are asking for the resignation of 55-year-old CEO Rolf Hollander. They also want a new board of directors and a special dividend of $6.5 per share for allshareholders, to be debt-financed by the company, according to an article by Spiegel online.

The hedge fund’s announcement comes in the middle of a major restructuring effort at the traditional company. The turnover from the development of conventional film is falling. Only 20 out of aformer 29 production plants are still in operation, and more shutdowns are planned. Seventy employees will be let go shortly in Berlin alone and in January Hollander had to announce that returns forthe current year shrank to $31 million.

Cewe Color hasn’t changed since the 1960s. “We’re very thrifty,” says Hollander, the company’s turnover from digital photography is rising but the company’s old area of specialization is stillshrinking faster than the new digital one is growing.

David Marcus, who runs the hedge fund M2, has been active as a Cewe investor since 2005 and has decided that the restructuring process isn’t happening quickly enough. Marcus has written two letters to the board of directors, accusing the company’s management of being incapable of implementing a successful restructuring process. “It’s a listed company, not a family business!” the hedge fund expert said. He says the Cewe bosses are “fighting an old battle” and that the company needs “hungrier and more aggressive people at the top.”

Marcus has invested the hedge fund’s $300 million assets in 17 European companies, including German companies such as EM.TV, GEA and Constantin Film. But M2’s return dropped from a presentable 34 percent in 2005 to 7.5% in 2006, hence the new demands for a company turnaround.

Alex Akesson
Contributing Writer
HedgeCo.Net
Email: Editor@hedgeco.net