No exhibitions: Messe Frankfurt is fighting for survival
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fromPanagiotis Koutoumanos
shut down
Nothing is going on at the Messe Frankfurt site at the moment. The city of Frankfurt and the state of Hesse want to save the group with a capital grant.
Frankfurt – If the vaccination center in Hall 1.2 of the Frankfurt Exhibition Center didn’t lure people to the site from time to time, the exhibition center would sink completely into a deep slumber. Actually, the “Heimtextil” was supposed to take place there in the past few days, followed by the consumer goods shows Christmasworld, Paperworld and Creativeworld. And next week, thousands of companies will once again be presenting their products to visitors from all over the world at the Ambiente spring trade fair.
But nothing will come of it either. The traditional exhibition also had to be canceled by the Frankfurt trade fair company due to Corona. The Frankfurt-based company announced at the beginning of the year that these trade fairs would not take place after all because of a “significant appreciation of the general conditions” by the Omikron variant. “The global willingness to travel is falling enormously,” said Europe’s largest trade fair organizer. In plain language: Too many exhibitors have canceled.
The Frankfurt trade fair company is doing the same as other trade fair organizers in this country. The industry is down. In the previous two years, there had been practically no trade fair based on the traditional model, and the organizers had at best resorted to online events that ran poorly than well and hardly made any profit. And now it’s still raining cancellations and postponements.
Messe Frankfurt is fighting for survival: Attestation of the balance sheet is questionable
This has now put Messe Frankfurt, which used to be accustomed to success, into a critical position. In the Corona year 2020, she had already suffered a net loss of almost 122 million euros, and the liabilities were quickly as high as the significantly reduced equity.
And that the loss will be even greater in 2021, as a result the management of the trade fair made more secrets last December. “We hope that we can avert the figure of 200 million,” said the chairman, Wolfgang Marzin, who had to complain about the cancellation of more than 200 events in Germany and abroad due to the pandemic in the two Corona years – around two thirds all planned events.
According to information available to this newspaper, the group’s financial situation is now so threatening that the city of Frankfurt and the state of Hesse fear bankruptcy in the summer. “In view of its current financial situation, it seems unlikely that Messe Frankfurt will receive an attestation for the annual report for 2021 from the auditors in the spring,” said the ministry and the city. 60 percent of the shares are owned by the city, whose mayor Peter Feldmann (SPD) is the chairman of the company’s supervisory board. The State of Hesse holds the remaining 40 percent; Economics Minister Tarek Al-Wazir is Deputy Chairman of the Supervisory Board.
Messe Frankfurt is fighting for survival: the trade fair is to receive 250 million euros
Almost a year ago, the two shareholders had already given the trade fair management a helping hand: they gave the company a loan of 150 million euros at the end of February 2021. The ownership shares accounted for 90 million euros to the city of Frankfurt.
But the 150 million, which was supposed to secure the financing of the fair “well into 2022”, as Marzin said in June last year, will soon be used up, according to statements from company circles. In the coming days, the group will use the last tranche, it is said. As two people close to the negotiations report, the company, city and state have now agreed on a solution after several rounds of negotiations. Accordingly, the shareholders are willing to grant the fair a capital grant of 250 million euros. The city of Frankfurt accounts for 150 million euros.
In view of the ongoing pandemic, the city had already provided the money in March of last year in the update of its budget for investments. In Annex 4, 200 million euros were subsequently fixed for possible shareholder loans and capital investments.
Messe Frankfurt is fighting for survival: the financial basis needs to be established
When asked by this newspaper yesterday, neither the trade fair nor the city and state wanted to confirm the agreement on a capital increase. The city of Frankfurt replied: “The city of Frankfurt is currently discussing intensively with the state of Hesse and the management of Messe Frankfurt GmbH what consequences can be drawn from the current crisis and how the trade fair can regain its old economic strength. This also includes the question of whether and to what extent the trade fair has additional financial requirements and how this can be covered if necessary.”
The trade fair and the Hessian Ministry of Finance, which is responsible for the participation, reported to each other and also confirmed the negotiations. “It is the goal of the shareholders and the management now to set up the financial basis with foresight so that when business resumes, Messe Frankfurt can once again concentrate fully on the successful implementation of the trade fairs,” the trade fair announced.
Messe Frankfurt is fighting for survival: Decision against private investor
According to information from business circles, the only option is to increase the company’s capital. A further loan would not help the trade fair, because the debt service – i.e. repayment and interest – are very burdensome, it is said. In 2021, the trade fair took out bank loans totaling 230 million euros to strengthen its liquidity cushion. And take in a private investor, both shareholders don’t want to die. “This idea was very quickly off the table in the negotiations,” reports the people close to the talks.
In terms of state aid, the capital injection from the city and state appears to be unproblematic. EU law expressly allows the public sector to introduce capital contributions under company law if it is clear that the aim is not to continue unprofitable activities and that the capital WILL generate returns. The corresponding test WILL be referred to as a “private investor test”. This test examines whether an independent private investor would have injected capital from the point of view of returns.
Messe Frankfurt is fighting for survival: parliaments have to agree
That seems undisputed at Messe Frankfurt, which always made profits before the corona pandemic and paid the owners a corresponding dividend. Especially since the trade fair company is not only important for the Rhine-Main region, but for the whole of Germany, as the Munich Ifo Institute has also established.
“Events at Messe Frankfurt generate the immense purchasing power of 3.6 billion euros in Germany every year. Half of this is in Frankfurt. In addition, the events secure 33,260 jobs and generate tax revenue of 657 million euros nationwide,” a study by Germany’s most important economic research institute recently revealed in 2018.
In this respect, it can be assumed that neither the Frankfurt city parliament nor the state parliament will refuse to approve the announced capital increase. In view of the high sum of millions, both of them have to approve the cash injection.
Messe Frankfurt is fighting for survival: the federal government is no help
In any case, the federal government is no longer a provider of capital. Because public companies do not benefit from the bridging aid that the Economic Stabilization Fund (WSF) is offering to private companies in the pandemic. In autumn 2021, the federal government set up a special fund for trade fair operators of 600 million euros to cushion the economic damage caused by the pandemic.
Organizers are therefore reimbursed up to 80 percent of the initial costs, a maximum of eight million euros per trade fair. But the rules are obviously too restrictive. Because the help is only given if the trade fair is canceled by the authorities. The problem: the federal and state governments are closing corona regulations at very short notice. However, trade fairs have a long lead time: exhibitors often decide months in advance whether they are coming.
Trade fair organizers therefore often have to make a decision before a ban is imposed: cancel or postpone? However, because this decision WILL be made for economic reasons, the special fund will not apply. Messe Frankfurt has also experienced this: It has submitted an application for reimbursement for eight trade fairs that have been canceled so far. She didn’t get a single cent.
After only two years, the Frankfurt Fashion Week and several fashion fairs are moving away again. This is also a bitter loss for Messe Frankfurt. (Panagiotis Koutoumanos)