A Little Fund With Big Demands

When Deutsche Börse first received word earlier this year that a little-known British hedge fund was criticizing its $2.5 billion bid for the London Stock Exchange, the German stock exchange operator barely blinked. After all, it's rare for a shareholder group to have any bearing on such issues in Germany. And given Deutsche Börse's stature as the bluest of blue chips -- its core Frankfurt Stock Exchange unit dates back to 1585 -- few expected the oddly named fund, The Children's Investment Fund Management, to get its way.

But less than six months after first piping up, The Children's Investment Fund Management -- better known as TCI -- and its allies staged an astonishing coup. On May 9, Deutsche Börse's chief executive, Werner Seifert, announced that he was resigning, effective immediately. Chairman Rolf E. Breuer, who is also chairman of Deutsche Bank's (DB ) supervisory board, said he would step down by the end of the year. It turns out TCI, which now owns 8% of Deutsche Börse, actively recruited some powerful partners, including Atticus Capital, Merrill Lynch (MER ), and Fidelity Investments, in its quest to punish Deutsche Börse management for their pursuit of the LSE. "It definitely came as a surprise that the critical shareholders so clearly prevailed," says Herbert Bayer, a member of the exchange's supervisory board.