Jan. 7 (Bloomberg) -- In December, German billionaire Adolf Merckle gave a rare interview to defend his failing investment strategy.

“We are now lumped together with hedge funds, while in fact it was a growth strategy that allowed us to fund companies that are fundamentally healthy,” he told Frankfurter Allgemeine Zeitung. “I have already overcome many of these so-called market crashes, but I could not have anticipated a financial and banking crisis of this size.”

On Jan. 5, Merckle threw himself under a train near the southern German town of Blaubeuren, where in 2005 he lived in a flat-roofed bungalow with a nameplate outside. The suicide was confirmed by a statement from his family, for whom Merckle left a note. A man who answered the family’s home phone number declined to comment further.

Merckle, 74, spent December negotiating with banks he owed about 5 billion euros ($6.7 billion) to save the family empire he built over four decades. After taking over his grandfather’s business, he created Phoenix Group, Germany’s largest drug wholesaler, and started generic drug maker Ratiopharm GmbH.

The family holding company, VEM Vermoegensverwaltung GmbH, lost money in 2008 after betting shares of Volkswagen AG, Europe’s biggest carmaker, would fall. In a two-day period in October, Volkswagen’s stock quadrupled after Porsche SE said it would raise its stake.

Merckle also controlled HeidelbergCement AG, Germany’s largest cement company, whose shares fell 70 percent last year as the financial crisis hurt demand for building materials and investors shied away from companies with debt.

He had a $9.2 billion fortune, Forbes estimated last year.

Trained as Lawyer

“It’s a terrible price to pay,” said Randel Carlock, director of the Wendel International Centre for Family Enterprises at French business school Insead near Paris. “Entrepreneurs keep scores of their lives based on business performance. Merckle was confronted with serious financial setbacks that pushed him over the edge.”

Merckle was born in 1934 in Dresden. After studying law, he took charge of the family pharmaceuticals business in the 1960s. The company then employed 80 people and had sales of 4 million deutsche marks ($2.8 million). Merckle’s businesses today employ more than 70,000.

In 1973, he founded Ratiopharm, counting on growing demand for cheaper drugs in Germany. Generic drugs, chemically identical to brand-name counterparts, cost less than originals. Ratiopharm had sales of 1.8 billion euros in 2007.

He expanded through acquisitions, adding drug wholesalers across Germany. Phoenix, Merckle’s pharmaceutical group, had 21.6 billion euros in sales in fiscal 2008.

In 2007, Merckle paid 9.5 billion pounds ($14 billion) to add British aggregates supplier Hanson Plc to HeidelbergCement. At the time, it was the biggest takeover in the building- materials industry.

Christian Faith

In Merckle’s home region of Baden-Wuerttemberg, the family is known for promoting the Christian faith and family friendly policies for workers. Ratiopharm employs a priest and every year distributes a book with Bible verses to staff. Employees are allowed to stay at home for as many as six years to raise children.

Merckle used family ties to expand outside pharmaceuticals. His wife, Ruth, is a member of the Schleicher family, which controls Schwenk Beteiligungen, once HeidelbergCement’s biggest investor.

Merckle’s mother was part of the Spohn family, the controlling shareholders of Spohn Cement, which Merkle used to make his offer for HeidelbergCement in 2005.

“I find it tragic that somebody would take his life because of a series of bad investments, a life that is far more valuable than money,” said Wolfgang Gerke, director of the Frankfurt School of Finance and Management. “These days a lot of investment bankers would have to die if this were the standard.”

Father of Four

Merckle leaves four children. Ludwig is a director of the holding company, VEM. Philipp was CEO of Ratiopharm from July 2005 to April 2008, when he moved to the advisory board. Tobias runs a center for juvenile offenders. Merckle also has a daughter, Jutta.

Family businesses can struggle more than publicly traded companies in difficult times because they are reluctant to fire people, they have a longer term view and their name is on the building, according to Insead’s Carlock.

Now the Merckle family has to negotiate with lenders and appoint a new leader.

“The family is mourning their loss at the same time as they have to figure out succession,” Carlock said. “The family will have to live with this.”

To contact the reporters on this story: Simon Clark in London at sclark4@bloomberg.netSheenagh Matthews in Frankfurt at smatthews6@bloomberg.net.

Last Updated: January 6, 2009 18:01 EST