A Gray Banker He Isn't

It's afternoon on a windless winter day, and from his hilltop headquarters, Martin Ebner looks down to Lake Zurich, shimmering and stretching toward the center of Swiss financial power, 18 miles away. "It's a good place to do some thinking," he says.

And also some big-time trading. From his bucolic surroundings, Ebner works the levers of some $35 billion in investments that routinely rattle the nerves of Switzerland's corporate hierarchy. Today, he's pondering the future of Union Bank of Switzerland, with $212 billion in assets. Giant UBS could "be one of the best banks" in Europe, Ebner says in a rare interview. But, he adds, "there is more to do."

From anyone else, that might come as wishful thinking. But Ebner recently has accumulated 10% of the equity and 20% of the voting rights in UBS, Switzerland's largest lender. Of all Zurich's famed gnomes, the 48-year-old Ebner may be the least known outside Switzerland. But on his home turf, he has markets hopping with nearly his every move.

SHAREHOLDER ACTIVIST. In the eight years since he started his BZ Bank, now perched atop a Zurich department store, Ebner has turned a knack for investment innovation into a financial phenomenon. With institutional investors eager to back him, Ebner can now, at any given time, mobilize as much as 15% of the $260 billion Swiss equity market. BZ Bank has custodial control over shares worth some $18 billion, and that clout is doubled by pension fund clients who closely follow Ebner's lead.

Through the BK Vision closed-end investment fund he set up three years ago to invest in Swiss bank and insur-ance stocks, Ebner's BZ group has made itself UBS' largest shareholder, with a $1.8 billion stake. "BK Vision is at least as interested in influence and votes at UBS as in financial performance--maybe even more interested," says Merrill Lynch & Co. analyst Ian McEwen.

Indeed, to Ebner and his handful of partners, such shareholder activism is precisely the point of a Swiss corporate governance movement they're pioneering. "Who else in Switzerland is doing what Martin Ebner is doing for shareholders?" asks Geneva-based stockholder-rights activist Andr Baladi. "Nobody."

Ebner's approach is to take sizable stakes in a handful of companies, establish close ties to management, and apply steady pressure to maximize returns. "We don't care about power," he asserts. "We're going for value."

And profit. With assets of just $828 million, BZ Bank's earnings of $109 million last year made it Switzerland's fifth most profitable bank. His publicly traded funds have been no slouch. Last year, share prices of BK Vision and Pharma Vision, which invests in drug companies, nearly doubled.

GILT-EDGED BACKERS. Although Ebner is taking aim at the heart of Switzerland Inc., a good chunk of the country's usually ultraconservative business community is behind him. Luxury-watch maker Rolex Holding, for instance, is a major investor in BZ's pharmaceutical and financial funds. And Ebner's bank client list includes some of Switzerland's biggest pension funds and insurance companies.

Such gilt-edged backing gives Ebner enormous market clout. And even competitors admire his gadfly role and his innovations.

Indeed, standing out from the crowd has made a career for the soft-spoken Ebner, as well as a personal fortune estimated at nearly $300 million. Ebner got Swedish venture-capital backing to set up BZ Bank in 1985. Moving into fund management in 1991, Ebner bought control of Pharma Vision 2000, an investment trust. He then acquired a 12.5% stake, worth $3.1 billion, in Roche Holding, the pharmaceutical giant.

But nowhere has Ebner struck bigger sparks than at UBS, where even admirers have a hard time distinguishing between Ebner's financial aims and what some consider a personal vendetta against the bank's management. The first flare-up occurred last year, when UBS executives voted Cristoph Blocher, a close Ebner ally and head of Pharma Vision, off the UBS board. Blocher had battled with UBS President Robert Studer over the banker's backing of a plan for Switzerland to join a European free-trade zone as a step toward membership in the European Union--something Swiss voters ultimately rejected.

Ebner complained about Blocher's ouster, then filed suit to stop UBS from creating shares to make acquisitions without any shareholder approval. The case, still pending, may end up in Switzerland's highest court.

ON THE PROWL. Ebner's clout is limited by a UBS rule barring any individual stockholder from voting more than 5% of the shares. Still, Ebner has the power to block initiatives. He contends that he has spurred Studer to slash costs and boost the bank's return on equity. Last year, profits jumped 69%, to $1.6 billion. The higher earnings pushed the bank's return on equity to 11.5%, from 7.4% in 1992. But that's still far behind Wall Street's J.P. Morgan & Co., whose ROE last year was a healthy 23%. So, Ebner continues to insist that UBS' asset base is too large and to press Studer not to launch any project that will yield a return of less than 15% on equity. Studer says the cost-cutting and a drive to boost the bank's ROE are "part of a strategy we formulated in 1988," years before BK Vision began buying UBS stock.

Now, Pharma Vision and BK Vision are getting ready to prowl for targets beyond the Alps. Eventually, Ebner may face the prospect of having to exchange his role as gadfly for the quite different task of actually controlling one of his chosen investments. But that's scant encouragement for UBS' Studer and his colleagues, who will be looking over their shoulders at Ebner for some time to come.

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