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Glaser und Spang, the stock podcast about stocks and shares with a focus on Germany, with Volker Glaser and Lukas Spang. Welcome to a new podcast episode of Glaser und Spang.
And my name is Glaser. Yes, today we once again have a guest with us, Mr. Laumann from Mutares. We chose this conversation today for a good reason: Mutares has had a very exciting subsidiary on the capital market since the end of October, on the stock exchange, which has seen spectacular price developments in recent weeks. The price rose from the listing at €14 to a peak of just over €400 in the short term, even off-exchange. What makes this story so exciting is that the company is active in the defense sector, supplying engines and auxiliary engines, and naturally, in the context of the discussions and plans of the German government to invest a very high amount, in the high three-digit billion range, in the coming years — so to speak, 'whatever it takes' — has created a lot of euphoria among the stock market and investors. This has also boosted the share price of the company whose guest we're talking to today. But first: Hello, Mr. Laumann.
Hello, and welcome. It's great that you're taking the time, Mr. Laumann, to be our guest on such short notice. A quick request: Could you briefly introduce yourself to our listeners and also tell us what Mutares does, for which you're active as a board member, so that we all have the same level of understanding here.
With pleasure. So, my name as mentioned is Johannes Laumann. I'm the Chief Investment Officer of Mutares, responsible for everything from acquisitions to portfolio development to the eventual sale, plus the Investor Relations area, which we actually handle jointly as the board, but ultimately the responsibility lies with me. What does Mutares do? Mutares is a financial investor, listed on the SDAX, headquartered in Munich. We're active in 13 countries, specializing in corporate situations and turnarounds. We buy unloved children from large corporations that want to divest them, for all sorts of motivations: whether it's a restructuring, a refocusing, something that was acquired in the past for a motivation that no longer exists, or simply for commercial reasons — a company that's making sustained losses, they have no idea how to restructure, and would rather end it with a bang than have a never-ending nightmare. So there are many motivations. We're mainly active in Europe, but over the last two years we've also set up offices in Shanghai, Mumbai, and Chicago, so we're positioning ourselves globally with our business approach. Mutares has approximately — we have just under 40 portfolio companies in four segments: one is the Automotive and Mobility area, one is the Plant Engineering area around Engineering, so high technology, then one is the Logistics area, one is Services, and one is the Retail area. The 40 companies make approximately a run-rate of 7 to 8 billion euros in revenue and have over 40,000 employees. In the holding itself, we have 250 employees. Why does a holding have so many? An investment holding — these aren't primarily investment bankers, but rather operational people. We have 160 operational advisors who circulate in these 39 companies from Monday to Friday and try to make them a little better every day than they were yesterday. And one of the investments was also Steyr Motors, which we acquired from Thales. Thales had acquired Steyr Motors to secure their supply chain, and they no longer saw this strategic necessity and then sold the company to us in an exclusive process, honestly speaking, at that time.
Yes, maybe we can actually jump right into Steyr, before we go into more detail about the rest of the business model and activities. Maybe you could say a few sentences about how the Steyr acquisition came about, what condition you found Steyr in back then. If you look at Steyr today, I think it's a completely different company. And of course, did you actually pay anything for Steyr, or did they even give you something on top? Maybe a few details.
So, how did the Steyr acquisition come about? We had a relatively good network in France, and this deal was brought to us through that network. Thales, with the help of a broker, was doing this deal, and this broker, along with myself and the then France managing director, were able to convince the Thales board to let us look at it for three months first. If we couldn't close a deal in three months, they'd go to the market. And I believe one of our greatest strengths is quickly grasping a situation and then also closing a deal. I think the fastest deal we've done — I've been on the board since 2019 — in those six years was, I believe, 17 days between first contact and signing. Yes, and accordingly we did the deal with Thales back then and took over Steyr Motors.
Steyr Motors was, as mentioned, primarily about securing the supply chain as the main motivation, and at that time there was no focus on operating as an independent company. That's beside the point. Of course there were external customers, but the main focus was supplying Thales for Thales' customers. And I really believe that in hindsight it's probably very, very funny, but they actually meant it seriously at the time: Thales had started and essentially completed a development program at Steyr Motors worth over 20 million for a hybrid engine that was supposed to go into a tank and then be delivered to the Australian, I believe, and Spanish armies. Investment program of approximately 20 million euros. That is, I think, completely, completely fine for the group if you want to do that within the group. You want to be compliant with all emission standards and be innovative and move forward. Yes, my opinion was: when a tank rolls, the emission standard doesn't matter. And I had the same discussion, funnily enough, yesterday in an interview with Management Magazin about Magirus: when a fire truck rolls, I don't think the CO2 emissions of the fire truck are the main problem. And that's how it was.
We set up Steyr as an independent company. Julian Kassuti, the CEO, did an extremely good job together with the team — part of these 160 people — and we set up the company independently, found new customers, and focused on the diesel engine product. Yes, we primarily sought customers in the military sector, because that's naturally a lucrative industry right now, but we also pushed the industrial sector. Yes, industrial was actually only maritime, but we're now also in the transport area, for example regarding trains, in final negotiations with a major supplier where we can deliver. And so we set up Steyr as an independent company and are now naturally benefiting massively from the special economic boom. The Rheinmetall order was the first larger order here in Germany, but we've also done an order with the US Navy, done a lot through our joint venture partners, also in Brazil. Julian Kassuti is in India next week, where there's something new again. So, what was all uninteresting for Thales. And we built up the company there. If you look at Steyr today: we still work a four-and-a-half-day week in one shift. Yes, that means the production capacities we have at Steyr — also through efficiency improvements we've made on the shop floor, honestly — we can easily cover one and a half times the current volume at the current location. And honestly, 2,000 to 3,000 engines would be possible in terms of capacity.
Yes, yes, yes, absolutely. And then you'd have to expand or find further efficiency improvements or buy subcomponents or... But currently you could basically triple the revenue at the current location, you just need to find people.
But that's not a huge issue in that region right now.
Now, as a Mutares investor, we naturally also want to know the acquisition price: Was there something with it, or was it a transaction for one euro, which would be a typical Mutares deal, or was it an atypical Mutares deal?
It was a very typical Mutares deal.
Okay, so that means — typically you get more than just the drinks cabinet. It was... okay, that's naturally very good. What was it back then? So normally, Mutares's model is also to sell after an appropriate period when they're healthy again at a very good price. Here, there was the decision in October to do the listing, where probably some people are very happy now with how it turned out. Was there also a dual-track process where you said we'll sell it quickly, make our cut? Was that also a topic? And what was the motivation to say, no, we'll bring it to the stock exchange with the listing after all?
So, there was a dual-track process. There was also a bidder with whom we went relatively far, quasi up to the last 10 meters of a 100-meter race, as you might say. We were on the last 10 meters and then decided in favor of the listing, for a reason that I think is very understandable. We said: when you see the orders that Steyr Motors is winning — these are long-term projects — that means you actually have, or we also have today, visibility into the following years where the order volume is fixed and where you actually already know the profit today for a significant portion of your revenue. And with this perspective, and also back then — at that time there were still two crisis hotspots in the world, which still exist somehow now again since a few days, but back then Gaza was still in full swing and Ukraine also had no end in sight and a change of government was somehow being discussed. This special economic package of 100 billion was there, where everyone knew it wasn't enough, and people were talking about a European army. For us, that was okay, there are many, many upsides, and representing these upsides in a trade sale is naturally very, very difficult. Yes, you can somehow arrange it through earnouts, but we are rarely in the scope that's in the purchase agreement. And that's why we couldn't agree on any earnout structure that, in my view, was lucrative, that somehow represents the fair value or where we would have had fun, let's say, also profiting from it in the future. And that was then the decisive point to say: we're doing an IPO in the smallest possible volume, more or less, or in a very small volume, to then successively also profit from the further development of Steyr. What happened in the last few weeks — yes, we didn't know that either.
What happened then — just briefly again —, that was back then approximately 70, 75 market cap, and it's safe to assume that the offer on the table was rather lower. So, everything done right from your perspective. What happened here? We had — Lukas was in Hamburg, had a meeting with the CEO of Steyr, and brought back three top highlights, did the podcast with me, and back then it was 14, 15 euros. As I said, that wasn't 10 years ago, but five weeks ago. And he naturally also brought Steyr as a highlight. So, anyone who followed that had real fun in between. Currently also: What, from your perspective, has happened here in the last two weeks that we went up to a peak of €400?
I've gotten this question not for the first time in the last — it totally surprises me, I thought — so, I would sometimes feel like I should apologize for where the stock price was and that Steyr was worth 2 billion at some point, which from my perspective is a bit crazy, or not just a bit. But only a bit, exactly. What I do truly believe — and everyone has to decide for themselves —, what I truly believe, and that's also why I made the decision for the IPO back then, is that Steyr is sustainably, also in this environment, an incredibly great company. We have — they had profitability last year already, they have profitability this year. I don't know if you can make this public, but they achieved a 30% EBIT margin again in February, Steyr, month-to-date. So this is a company that can reflect its revenue growth with production without significant care packages. They will achieve the revenues because the order book is there. They will land in profitability, which is somewhere above 20% EBIT. And then everyone can think about what a reasonable P/E ratio is for a company like Steyr in the current situation, when the German government — we're only talking about Germany here — is putting 400 billion in. The first one who somehow got to eat after that — I'm actually just waiting for Macron to say: 'I saw a great idea in Germany, we're also going to do such a special fund now.' Yes, or the Spaniards come or the Italians come. And at the end of the day, there just aren't that many people who build tanks. And that's just Germany. And therefore I believe that Steyr is an asset where, in this area, from my perspective, it will remain lucrative for the next 10 years, because everyone will replenish their depots, even in peacetime.
What potential does the company have medium-term? The company will probably — they say so themselves — grow beyond 100 million, probably already next year with a margin above 20%. But what would be possible perspective-wise in three to five years?
In three to five years we'll be world champions in football again, quite far ahead. But let's take two to three years. Yes, I believe that Steyr is a company that can easily reach 150, 200 million in revenue in the next two to three years with the profitability that's there, above 20% EBIT. The order book for '25 is secured, '26 is already significantly full. And now I naturally also know Steyr's pipeline a bit. I'm not worried about the years '27, '28 either. And all these joint ventures that Julian has now set up, also with India and in China and also Brazil, they're starting up now, but the real impact will actually only come from around '27. Yes, you have the lead time, joint development, and then you have 12 to 18 months of development phase, and then it really takes off.
So will there be more order announcements? Will it be very dynamic?
Yes, the difficulty — and I have to say this too —, getting someone to allow you to publish such an order award is not so easy. So that really — I was very surprised that Rheinmetall was allowed to be announced so prominently. I wouldn't have expected that.
Can you assume that it took more than one phone call to be allowed to issue that press release?
But maybe just briefly back to the price development: Is it true that the stock was recently included in a European defense ETF?
I don't know that. I can't confirm that. But I personally — without really knowing — I personally believe, of course, that this price rally was also very strongly driven by ETFs, because there are probably a few defense or defense ETFs and then clearly, everything probably came together. They exist, and Rheinmetall has also risen strongly, Rheinmetall has risen massively. Steyr wasn't so prominently known until recently. That was probably a bundled effect that created something like this here. But we have actually also — not at 400 —, but we've also seen some OTC trades well above the €100 mark, not just 1,000 shares, but several 100,000.
Good, Mutares has now also announced — because I once learned from another private equity manager that private equity is rather for a limited time. That should also apply to Mutares. That means you won't be married forever, but will eventually part ways. At the IPO it went down to about 71%. Mutares has now itself announced that it will sell shares here. Have shares already been sold here, or what is the plan to reduce the stake?
Yes, so we want to increase the free float, also because we actually already before this rally had increasingly and also very many inquiries about whether larger packages could be acquired — yes, so a few percent of Steyr, which isn't possible without Mutares. No, because at the end — we had, or at the IPO, a free float of, I believe, 11% actually, no, because there was the Austrian family office that took 9.9%, then there was a portion for the employees who had a claim, and then there was our 71%. That left, I believe, about 11% free float only. And you can't acquire 3, 4% or 5% there, ruled out. So we initially declined, because we said: let's first see how the stock performs. And I also — since I've only been on the board since 2019, I had to endure the aftermath of the IPO back in 2018. But we don't want to talk so much about the past, we don't want to talk about it at all, but exactly, I don't want to have that anymore. Rather, we want to sustainably go with Steyr, yes, and that was the goal. Now we said: no, we won't do that. And now naturally in the context of this rally, you have to say two things. The first is this interest now also with the Bundestag's decision, with the fantasy that perhaps other European countries will follow. I believe today is the Bundesrat's confirmation of this — it just went through.
It's already gone through, okay, exactly, very good.
So, as expected, it's naturally something where the interest in packages has grown even further. And then it wasn't just the bank that listed it back then that approached us, but other banks also said: watch out, we have interest from customers who want something. And then we ultimately decided, on the one hand, to say: yes, we want to increase the free float somehow so that institutional investors can also get in. And on the other side — I go with Mr. Kaser on this — our investments are always a love affair for a limited time. And in the last few weeks there were times when this bride was incredibly beautiful. That means the quota has already fallen.
To what level, approximately?
The quota hasn't fallen significantly, but we have already parted with low single-digit percentages. Yes, and then we'll — we still hold a clear majority.
Then there will be another placement, or is it done for now, or is it opportunistic?
Opportunistic, opportunistic. So, if someone comes now and says they want to buy 5% for €14, then I don't know if I'd even take that conversation.
Was it OTC or on the exchange?
Okay. Is the goal to keep the majority for now, or what's the vision? Something like 6, 12 months or a year?
Keeping the majority? We want to maximally participate in Steyr's success, and currently I still actually see it as sensible to potentially keep a majority stake in Steyr. I do see that, because the growth will come, I'm sure of that. And at some point in two years you'll have a company that's making somewhere around 40, 50 million. And that's why I still see it that way. On the other hand, as I said, love for a limited time.
Yes, so at this point, as Volker already said earlier, you can only congratulate on the deal, because it really was — from today's perspective — a showcase deal. It probably couldn't have gone much better. But in the end, you naturally also know, especially when you're on the capital market, you should never celebrate too early because something can always happen. Is there anything else from your perspective to say about Steyr, or from your perspective, Volker? I think we've said everything about Steyr that's of interest. Maybe just on the general topic, because he was also convinced speaking about it — the defense topic: Do you assume that it will probably bring joy for years, in terms of the companies that benefit, then of course also Steyr? Is there something else in the portfolio? Or maybe first briefly your opinion on the defense topic of the next few years.
Yes, so I already hinted at it earlier: I believe the topic will remain current, even if the world perhaps becomes a bit more peaceful, everyone will replenish their depots, and accordingly I believe that this topic, at least on the economic side — maybe not always on page 1 of Bild Zeitung, but on the economic side — will remain current for the next, I don't know, 7, 8, 9 years. Steyr is not — we have several portfolio companies that also supply to the defense sector. Buderus, for example, has a defense share of almost 10% of revenue, or 10% of Buderus's revenue is defense. Yes, so also — funnily enough, actually the same order of magnitude in revenue as Steyr.
When will that go public then?
