The Great German Auction Is Looking Like A Private Sale

A name such as Sheraton or Inter-Continental should carry some weight in the bidding to take over one of eastern Germany's most alluring state-owned properties, the 33-unit Interhotel lodging chain. But these and other hoteliers seem destined for disappointment. Despite a worldwide effort to boost foreign investment in the region's reconstruction, government insiders say Bonn appears set to hand over the hotel group for $1.6 billion to Sixt, a fast-growing German rent-a-car chain with all the right connections.

The Treuhandanstalt, the state agency privatizing the former East German economy, won't confirm a decision has been made. "I know the winner, but I won't say," says Treuhand President Birgit Breuel. But already, foreign investors are complaining that the deck was stacked against them from the start. Such talk may only heighten feelings that the Berlin-based Treuhand is keeping its best assets for the German business elite. Indeed, of the 3,800 companies sold by the Treuhand since 1990, more than 90% have gone to Germans. Only 17 companies have gone to U. S. bidders.

'WE WERE MISLED.' Interhotel would seem a great buy for a global hotel group. One of the few profitable companies in the former Communist state, it operates the majestic Grand Hotel in Berlin and controls 40% of the region's hotel rooms. When Interhotel went on the block last year, more than 200 investors lined up. Among them was Berlin's Klingbeil Group, which offered to spend $2.4 billion to fix up Interhotel. It had signed up Inter-Continental, Ramada Inn, Sheraton, Marriott, and Holiday Inns to run the properties. But Munich-based Sixt apparently prevailed, even though it lacks any hotel experience. Says Alfred Weiss, general manager of hotels for Klingbeil: "We were misled."Sixt insists that its bid will give the Treuhand more of what it wants, largely job protection for the chain's 7,500 workers. Sixt promises to keep all of them and will permit the group's managers to continue running their hotels. "We have trust in these people," says Sixt CFO Manfred Sturm. But others say it was Sixt's founder, Erich Sixt, who actually made the deal click.

Over the past decade, Sixt, 45, has turned a modest car-rental company into Germany's market leader, with $750 million in annual sales. Along the way, he made valuable connections with Bavarian bankers. Now, several of them, including Bayerische Landesbank and Bayerische Vereinsbank, want to take stakes in Interhotel alongside Sixt in hopes of taking the group public in the mid-1990s. Sixt also has had dealings with S. G. Warburg & Co., the London-based investment bank that advised the Treuhand on Interhotel's sale. Among other things, Warburg underwrote part of a stock offering for Sixt in 1986. But Warburg notes that it hasn't provided any other services to Sixt since then. The Interhotel sale "was handled inthe most scrupulous manner," saysWarburg Director Piers von Simson.The sale has left prospective bidders for other Treuhand assets scratching their heads. "We have 2,000 investors waiting to negotiate with us," says Breuel. "We need international management experience." She may have to try harder if she really wants outsiders to join the game.

Before it's here, it's on the Bloomberg Terminal.