Lufthansa CEO Franz Quits in Surprise Move to Roche
Deutsche Lufthansa AG (LHA) announced the surprise departure of Chief Executive Officer Christoph Franz, who will become chairman at Swiss drugmaker Roche Holding AG (ROG), leaving the German airline in limbo as it works on a turnaround.
Franz, whose term expires on May 31 next year, told Lufthansa he’s not available for an extension, the Cologne-based airline said in a statement today. The company didn’t announce a successor. He will take over from Franz Humer, Basel-based Roche said in a separate statement.
Franz, who lives in Zurich after leading Lufthansa’s Swiss subsidiary, took the top job at Lufthansa in 2011 and embarked on a savings program that included 3,500 job cuts and a renewal of the fleet with more fuel-efficient models. Humer led Roche for more than a decade, and his departure coincides with a change of guard at cross-town rival Novartis AG (NOVN), where Daniel Vasella handed the chairman reins to Joerg Reinhardt.
“This is the right time for change in leadership,” Franz said. “Taking the decision was anything but easy after 15 years at the Lufthansa Group.”
Lufthansa rose as much as 1.7 percent and was trading 1 percent higher at 14.09 euros as of 1:03 a.m. in Frankfurt. The stock has declined 1 percent this year, valuing the airline at 6.5 billion euros ($8.7 billion). Roche rose 0.6 percent to 238.30 Swiss francs in Zurich trading, valuing the business at 205 billion francs ($221 billion).
Franz will inherit a company whose success in developing and marketing new cancer drugs has been tempered by failures in other areas of research. Roche abandoned its latest experimental diabetes drug over safety concerns in July and has said it may stop trying to develop heart and metabolic drugs altogether.
Roche has said it expects eventually to face competition from cheaper biosimilar copies of its top-selling Rituxan leukemia treatment and its Herceptin breast-cancer drug. The Swiss drugmaker has sought to make newer and better drugs in each area and won U.S. approval this year for the new breast tumor drug Kadcyla.
“Franz is well-connected in Europe, and he speaks the language and knows the culture,” said Fabian Wenner, a Zurich-based analyst at Kepler Cheuvreux with a buy rating on the stock. “The question is, what can he bring Roche? Does Roche need someone who has a deeper knowledge of the pharma business? Roche is really deeply rooted in the biotech business.”
Roche is also considering building its portfolio with takeovers, an area in which Humer, 67, wielded significant influence. The retiring chairman was CEO in 1999, when Roche bought a 30 percent stake in U.S. biotechnology company Genentech -- the deal that netted Roche both Herceptin and Rituxan -- and helped oversee the full takeover of the company as chairman in 2009.
Humer was paid 8.7 million francs at Roche last year, with Franz earning 2.6 million euros at Lufthansa. Franz is leaving half-way through the so-called score program, a plan to lift operating profit to a record 2.3 billion euros by 2015, which includes moving many short-haul flights to discount unit Germanwings.
Lufthansa is preparing to announce as soon as this week its biggest fleet order ever, with more than $14 billion in purchases planned from Boeing Co. (BA), the world’s biggest planemaker, and Airbus SAS, people familiar with the plan said.
The departure comes four months after Franz’s predecessor, Wolfgang Mayrhuber, withdrew his candidacy to join the supervisory board over investor opposition only to change his mind 12 hours later. Among possible successors for Franz is Carsten Spohr, who leads the Lufthansa passenger subsidiary, the company’s largest unit, and is a trained pilot.
“It’s disappointing that one of the key protagonists in pushing through the score program is departing before its completion,” said Donal O’Neill, a Dublin-based analyst at Goodbody with a buy recommendation on the stock. “But I suspect there are plenty of internal and external candidates who can take up the role.”
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