As Anglo-American hedge funds attack Schumag AG, a German industrial company, the majority shareholder and workers of the company as well as trade unions declare determination to fight hostile takeove

Berlin/Essen (ots) - Press Statement by Schumag Holding

Hedge funds are abusing the global financial crisis they helped to
create in order to lever out companies of the real economy. Example:
Attack by Concordia Funds manager Jason Cheung (London) and
investment banker Alexander von Ungern-Sternberg (London) on the
industrial company Schumag AG (Aachen, Germany).

- What this is about

Schumag AG is a German industrial company with a history
stretching back 178 years. The company manufactures precision
instruments and machinery and is listed on the stock exchange.

On 28 November 2008, the Anglo-American hedge fund Concordia
published advertisements in German newspapers announcing it would
sell Schumag AG shares by public auction in Frankfurt/Main, Germany
on 12 January 2009. Schumag AG's majority shareholder, Schumag
Holding GmbH (Essen), has completely rejected this plan and declared
it to be against the law. Schumag AG workforce are equally determined
to offer resistance.

- Planned auction is illegal

Such an auction would be farcical. Even if a 'virtual auction'
were to take place, no one could purchase these Schumag shares, as
the Concordia Funds do not hold the lien over these shares. The
contracts allegedly giving Concordia Funds a lien were found to be
unethical and nill and void after extensive legal examination. Hedge
funds that do not have a banking licence have issued loans in
violation of Section 138 para. 2 of the German BGB (usury clause of
the German Civil Code). The interest rates charged exceeded market
rates by much more than 100 percent. Usurious practice is also a
crime in Germany under Section 291, StGB (German Criminal Code).

- The dubious role played by Alexander von Ungern-Sternberg

At the time, investment banker Alexander von Ungern-Sternberg
(Euro-IB Ltd., London) described the above mentioned contracts as a
short-term temporary solution to be replaced later by regular
financing arrangements subject to usual market conditions. The
company's majority shareholder had no reason to doubt that Mr. von
Ungern-Sternberg, a former Deutsche Bank manager, would provide
responsible advice and he was granted an exclusive mandate. Alexander
von Ungern-Sternberg gave assurances, which appeared to be
trustworthy, that the hedge funds recommended would not use any
unscrupulous practices.

In September 2007, Mr. von Ungern-Sternberg was appointed as a
member of the Supervisory Board of Directors of Schumag AG and was
Chairman of the Board until mid-April 2008. It soon became clear that
Alexander von Ungern-Sternberg did not act in the best interests of
the majority shareholder and Schumag AG, but rather on instructions
from the hedge funds. Alexander von Ungern-Sternberg's plans to
withdraw capital from the company, as well as his leadership style,
resulted in the resignation of three highly respected board members.

Alexander von Ungern-Sternberg (Euro-IB Ltd., London) never
managed to arrange any regular financing to replace the temporary
financing. Instead he switched sides and violated the rules of the
British Financial Services Authority (FSA), by joining forces with
the hedge funds. Alexander von Ungern-Sternberg abused the insider
knowledge he had gained as Chairman of the Supervisory Board in order
to prepare a hostile takeover, on instructions from the hedge funds
and by way of a public auction of Schumag shares. Or at the very
least he wanted to force an early repayment of excessive claims
exceeding the terms of the agreement.

- Public auction to put pressure on the company and as a hostile
takeover instrument

In May 2008 the company's majority shareholder was first
confronted with the sudden announcement of a public auction of its
Schumag shares. As there would not have been enough time to have the
matter decided in court, the Metage loan was repaid in order to stop
the auction.

The current public announcement is intended to damage Schumag's
image and relationships with its suppliers, clients and operative
banks, in order to force the majority shareholder to give in to the
illegal demands made by the funds. If the majority shareholder
refuses to comply with these demands, the auction will serve as a
hostile takeover. That this is a poorly concealed hostile takeover
attempt is evident from the nominal value of the Schumag shares being
set for the auction.

Schumag Holding is determined to show the hedge funds their limits
in the current situation, and to fight off any hostile takeover
attempt and stop a breakup of Schumag AG. Unlike in May 2008, this
time the company's majority shareholder will not give in to the
unreasonable demands put forward by the hedge funds.

- The international financial crisis

The plans pursued by the hedge funds, together with their
accessory Alexander von Ungern-Sternberg, has a two-fold connection
with the international financial crisis:

1) While hedge funds have always been infamous for their
unscrupulousness, they have now become synonymous with losses and
bankruptcies. Three out of four hedge funds have made losses for
their investors in 2008. According to George Soros, every second fund
is on the brink of failure. According to insiders, the Concordia
Funds are also affected by this trend.

The more desperate the situation becomes for funds, the more
ruthless and irrational their attempts to convert positions into cash
become. These attempts extreme price fluctuations on international
stock markets and destabilise the global economy. They trample on
what is right and decent and jeopardise jobs and workers' existences.
But funds managers and investment bankers such as Alexander von
Ungern-Sternberg don't care about such issues.

2) The crash in the financial markets has made refinancing more
difficult. Banks, which under normal circumstances would have made
the necessary funds readily available to the majority shareholder, in
view of the exemplary positive business development and considerable
equity strength of the companies in the Babcock Schumag Group, are
now hesitating. Funds such as Concordia and investment bankers like
Alexander von Ungern-Sternberg are therefore intent on profiting from
the difficult financial environment which the hedge funds themselves
have helped to create.

- The Funds' refusal to find an acceptable settlement

Schumag AG's majority shareholder has made every effort to bring
about a mutually acceptable and agreeable settlement with the funds.
But funds manager Jason Cheung and Alexander von Ungern-Sternberg
have put up quite unreasonable obstacles. Their demands were
unacceptable and contrary to German securities laws. By insisting on
withdrawing all cash equivalents from Schumag AG they have also
endangered the future existence of this company and its long
tradition.

It is notable that Concordia Funds manager Jason Cheung has also
persistently refused to come to Germany to see Schumag AG for
himself. Mr. Cheung has declined any invitation by the majority
shareholder, he is hiding behind his desk and consciously closing his
eyes to the fact that he is dealing with a company with hundreds of
jobs at stake and an issue which affects hundreds of families.

- Workers and equity holders stand united

Ten days ago, Schumag AG signed an agreement with the SMS Group
(Düsseldorf, Germany) regarding the sale of its machine engineering
division. The proceeds from this sale, amounting to an eight figure
sum, will be used for initiatives such as the making of highly
promising investments to increase productivity and enhance Schumag's
international position. Jobs and the German production site in Aachen
will also be secured by such actions. This was mutually agreed by
Schumag's employees and equity holders.

Ralf Marbaise, Joint Works Council and Staff Representative in the
Supervisory Board of Schumag AG, noted: "Schumag AG employees regard
the illegal plan to auction off Schumag shares as an obvious attempt
made by unscrupulous financiers to break up our company. We agree
with the equity holders that we will not sacrifice Schumag AG, an
exemplary company in the real economy, to the dubious plans of hedge
funds. Schumag AG employees will not accept that. They are proven
fighters and stand fully behind their company. The actions of
Alexander von Ungern-Sternberg during his less than constructive time
as Chairman of the Board of Schumag AG are currently subject to legal
investigations initiated by the staff representatives on the
Supervisory Board some time ago. These investigations will be
completed very shortly. Legal remedies are only one dimension. A
coalition between our staff and the unions, members of the regional
and national parliaments, and other office holders from Aachen, the
state of North Rhine Westphalia and from the Federal level, will put
up a dedicated fight against a hostile takeover bid. We will also be
collaborating with our union colleagues in Great Britain during this
process."

- Legal sanctions

Both Schumag AG itself and its majority shareholder will emerge
stronger from this challenge. Schumag Holding and Schumag AG are not
the ones who will have to worry, but the Anglo-Saxon hedge funds
managers and Alexander von Ungern-Sternberg may face considerable
damages claims and legal issues, possibly even criminal proceedings.

Originaltext: Schumag Holding GmbH
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Media contact:
Schumag Holding GmbH (Essen); Contact: E. Uzun - Head of Corporate
Communications - Babcock-Schumag, Group - Phone: +49(0)30-20 60 68
650 - Mobile: +49(0)172-32-62-600, E-mail:
kommunikation@babcock-schumag.de