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Management

DIVERSIFICATION

O U T O F T H E S T E E L M I L LA N D O N T O T H E B E A O HH o w German dinosaur Preussag became a top travel operatorA few years ago, Europeans wouldhave turned to Gemianys Pi-eussagfor travel arlvice only if they plannedto vacation in a coal mine. The Hanovercompany, founded 75 yeai^s ago in thecoal fields of Prussia, was once a typicalconglomeratebig in dying industriessuch as steelmaking and shipbuiltiing.Yet in less than two years, low-keyCEO Michael Frenzel has transformedthe company into one of Europe'sbiggest travel outfits. It commands afleet of charter planes and ci-uiseships. Owning hotels with morethan 80,000 beds, it has a near-lock on the MediteiTanean. Now,Preussag may even consider tak-ing over French resort chainClub Mditerrane, giving it oneof the best-known brand namesin the business.SMART MOVES. Like JoachimFunk and Klaus Esser at Man-nesmann, the 52-year-old Frenzelis showing industrial Germanyhow to adapt to a global serviceeconomy. Just as Mannesmann'sexecutives turned the old pipe-maker into a telecommimicationspowerhouse, Frenzel has targeteda growth businesspackage trav-eland, with a series of deft ac-quisitions, achieved dominance in

while, poor results in Preussag's indus-trial businesses helped push first-halfprofit down 33.2%, to $141 million. Salesfor the year should rise 149'P, to $21 bil-lion, with almast half of the revenue com-ing from tomism.Little wonder that Frenzel is rushingto sell the units that are eroding profits.A shipbuilding subsidiary is going toOberhaiten-based Babcock Borsig, alongwith a factory-building unit. None ofiliE'se industrial businesses ever domi-

R E M A K I N GP R E U S S A G

MARCH, l-v:v,. Pays $1.5 bil-lion for a majority stake inHapag-Lloyd, owner of charterplanes and cruise shipsAUGUST, 1998 Acquires con-trol of Touristik Union Interna-t ional, German package-touroperator, valued at $1.3 bill ion^ARCH, 1999 Wins EU per-mission to buy a majoritystake in British travel agentThomas Cook/Carlson

- Gefs Germanrt'f:;iiia!L! V dpprova l to buyFirst Reisebro Management,

nated the market . "It was alwayme-too player," says M . M . Warburgalyst Eggert Kuls. Investors are plauding: While Germany's benchmDAX 30 Index has gained 12.7%year, Preussag shares have risen 50.to $58.64.IKTEGRATION. Little in Frenzels expence pointed to a future as Eurotourism czar. After studying lawworked at Dsseldorfs WestdeutsLandesbank, where he helped manthe state-owned bank's hokngs industry. He drew on his connectionthe bankwhich owns 33% of Presagafter becoming ( ' E O in 1994. Usamong other resources, shares alreheld by Westl.R, Frenzel bought conling stakes in two of Germany's bigtravel companies: Hapag-Lloyd, wowns cruise ships and a charter airand Touristik Union Internationapackage-tour operator with hotels linthe MediteiTanean. Encouraged bylongtime mentor, Westi-B ' K O FriNeuber, he combined them into a travel company called H T U , whose sare expected to reach $9.5 billion in1 9 9 9 . Preussag financed its travel acsitions with proceeds from the salthe steel subsidiary and other units

Frenzel can stay at the top of rope's travel industry only by continto expand its network of booagents, charter jets, and hotel rooThis so-called integi-ated approachpioneered in Europe by companies as Britain's Airtours. It has allowedBritish tour operators to enjoy pmargins more than triple those of man companies, analysts say.Preussag plans to go its Bish rivals one bet ter by creathe fii'st integi'ated travel opetor with Europewide reach. Elier this yeai', it agi'eed to

Thomas Cook/Carlson, Britfourth-biggest travel compFrenzel couJd rev italize Clubby boosting the number of mans visiting the French leichain's vacation villages.PVenzel's strategy is rAnyone with a checkbookbuy blocks of hotel roomGreece and resell them to light-deprived Germans. Mwhile, the Intemet is encouravacationers to bypass t ragents and book for themseThat could prove a thi'eat tooperators like Preussag in y

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