The Arms Company Hunt
While Waldemar was making his debut in high society and savoring those sweet hours with Alix, the political landscape both at home and abroad was shifting in ways no less dramatic.
On February 9, 1887 — three days earlier than in the original timeline — Britain and Italy signed a secret agreement aimed at checking the expanding influence of France and Russia.
Behind that agreement stood Bismarck, the professional Russia-swindler.
"So? Is the one who keeps getting fooled at fault, or the one who keeps doing the fooling?"
Bismarck felt not the slightest pang of conscience for having deceived Russia. However sordidly he behaved, Russia's wrath would fall on Britain, who had led the negotiations — not on Germany. With Britain taking on the role of handling the Russians, the international situation flowed in Germany's favor.
Domestic politics, too, smiled upon Bismarck.
"Wait — the Conservatives won that big in the general election?"
"This has to be election fraud!"
Contrary to everyone's expectations, the Conservatives scored a landslide victory in the general election held after the dissolution of parliament.
"Other parties might be fine on the economy, but on national security, it's Conservatives all the way!"
A major factor in that landslide was the "diplomatic victory" of having cowed France through military threat. Contrary to popular belief, however, the Conservatives did not immediately push for military expansion upon taking power. Thanks to Boulanger's early downfall, Germany simply did not take the French threat as seriously as it had in the original timeline.
Even so, high society fully expected that rearmament would come soon enough. Anyone looking at the Conservatives' inclinations could see it coming. Circulating among the notables of that same high society, Waldemar reached the identical conclusion.
If German rearmament is a certainty, then now is the perfect time to get into the arms industry.
Waldemar considered which arms companies might be worth investing in. Krupp would have been the best option if it were possible — but getting a stake in that insular arms conglomerate was far more difficult than one might imagine. As a second-best, he decided to go after Ludwig Loewe & Co.
Ludwig Loewe & Co. was no ordinary arms manufacturer that merely produced weapons the way Krupp did. It was a comprehensive military-industrial enterprise that also manufactured precision machine tools. Waldemar resolved to take the company as the cornerstone of his entry into the arms industry.
Waldemar's banker, John Connor, immediately prepared a ruthless acquisition plan upon receiving his instructions.
"The key is a paid-in capital increase. We need to present terms attractive enough for Loewe to accept."
"For example?"
"We invest roughly ten million marks in new capital and cover the entire cost of expanding the Berlin factory. On top of that, we offer to help guarantee performance on government military contracts, and to underwrite the existing debts of the Loewe family."
"Isn't that too generous?"
"Absolutely not. If you want Ludwig Loewe & Co. in your hands, you should be prepared to accept even more expensive terms than these."
John Connor stated it as fact. If the expert said even these terms weren't expensive, Waldemar offered no further objection.
"And the stake we can secure?"
Waldemar wanted, if possible, a holding that approached outright personal ownership. Only then could he pour in capital as he pleased and grow the company however he wished.
"If we take the maximum share of the capital increase and convert all of their debt into equity, we should be able to secure a sixty percent stake."
Waldemar wasn't entirely satisfied with that figure — though he understood well enough that even this was an enormous number.
"Sixty percent."
"However, the condition would be that they retain management control."
"Then what's the point of taking over the company?"
Whatever the case with other enterprises, Waldemar believed that an arms manufacturer absolutely had to have his own people in control of management.
"Of course, that part can be controlled through the contract."
John Connor proposed binding Loewe's position as manager through contractual terms, while Waldemar's side would exercise actual control over capital, finance, and strategy.
"We control the finances and corporate strategy."
"In practice, we'd be leaving Loewe with nothing but a shell."
This way, management rights would be neither here nor there.
"In the long run, we can finish taking over the company by compensating the Loewe side and pushing them out."
John Connor's plan was underhanded, but it was attractive in that they could swallow the company without a fuss.
"Fine. We'll do it that way."
The moment Waldemar gave his approval, John Connor set to work at once. At the same time, they tightened the purse strings through the banks that did business with Loewe. Given the overwhelming scale of Waldemar's enterprises, there was no need to wonder whose side the banks would take.
"Why on earth can't I get a loan?"
Isidor Loewe, the company's manager, went to Deutsche Bank in frustration to protest.
"Mr. Loewe, it's not that you can't get a loan. The review has simply been delayed a little."
"Look — even if we expand the factory right now, we'll barely make the government contracts and the Ottoman export orders. How am I supposed to wait months?"
"Well, just wait a little longer."
"Hah. There's no getting through to these people."
Loewe left Deutsche Bank and visited his other banks, but the loan officers' answers were all much the same. The moment they heard the name Loewe, they simply said the review would take time.
Have we fallen out of favor with the government? Or is it my brother?
When Loewe thought of the enormous volume he still had to deliver, the world went dark before his eyes.
After several days of desperately hunting for funds, he received astonishing news from his finance officer.
"Sir. We're saved. We're saved!"
"What are you talking about?"
"Someone's come who wants to invest in our company."
"What?"
At those words, Loewe felt every last worry melt away.
"Where have you put him?"
"In the reception room."
"Bring him to my office at once."
Loewe went to his office and spent a long while considering how to receive the investor. After some time had passed, a distinguished middle-aged gentleman appeared in the room.
"A pleasure to meet you. I'm Lucas Miller, from America."
"Welcome, Mr. Miller."
Lucas Miller introduced himself as a German-American who had come to invest the money he'd made in America back into his fatherland. Of course, Loewe didn't take that at face value — but Miller's appearance was reasonably convincing. His attire was unmistakably that of America's uppermost class.
"You made your money in finance in America?"
"I made a bit of money shorting stocks."
Miller explained that he had also opened a letter of credit in Berlin.
"If I put my mind to it, I can bring in about twenty million marks."
Twenty million marks? Do those New World bumpkins really have that much money?
Loewe, who had initially looked down on Miller, found himself overwhelmed. The two men finished sounding each other out and got straight to the point. Miller didn't mince words; he stated plainly that he wanted a stake in Loewe. For a man who desperately needed a massive infusion of capital, this was a demand Loewe couldn't refuse.
"How large a stake do you want?"
"Sixty percent, including the newly issued shares."
"What? Sixty percent?"
That was tantamount to asking him to hand over the company. Loewe thought there was nothing to discuss — until he heard the terms Miller was offering, and his thinking shifted a little.
New capital contribution of ten million marks.
Full additional coverage of the Berlin factory expansion costs.
Assistance in guaranteeing performance on government military-supply contracts.
Underwriting of the existing debts of the Loewe family.
In exchange: a sixty percent equity stake, including newly issued shares.
In exchange for this enormous support, sixty percent of the shares wasn't something he couldn't accept. Loewe fell into thought.
"What do you say?"
"If you could reduce the stake you're asking for, I'd agree."
At Loewe's attempt to negotiate, Miller cut him off cold.
"Then this conversation is over."
When Miller moved to end the talks and stand up, Loewe grabbed him in a panic. With even his primary bank refusing to lend, his only hope of expanding the factory rested on this American. Loewe quickly adopted a more humble posture.
"You should at least finish the conversation. If my terms don't suit you, perhaps we could discuss them again?"
Miller's reply was uncompromising.
"My terms are non-negotiable. Sixty percent. If that's not acceptable, there's nothing to discuss."
Faced with Miller's stubbornness, Loewe had no choice but to indicate his agreement. If he didn't close the deal now, the military contracts and the exports would all fall apart. He had no other option.
"Mr. Miller, I agree to transfer a sixty percent stake."
In return, Loewe tried to get a little more. After a lengthy back-and-forth, he succeeded in raising the new capital contribution from ten million marks to thirteen million. Clearly Loewe had won the negotiation — yet Miller's expression didn't so much as flicker.
"Then we have an agreement on these terms."
"Yes."
Loewe signed the contract Miller handed him. At that moment, he never dreamed that his company had fallen into the hands of the notorious corporate raider, Waldemar.
Waldemar and John Connor smiled from ear to ear when they heard the deal had gone through.
"With this, Loewe is effectively in our hands. Once the capital increase goes through, Ludwig Loewe & Co. will be Your Highness's company."
"Taking over management will take some time, I assume?"
"You'll probably need to wait about three years."
Waldemar figured he could wait that long.
I'm someone who can wait ten years, twenty years if I have to.
He instructed John Connor to wrap up the remaining work cleanly.
But the optimism of Waldemar's camp didn't last even a few days before it collapsed completely.
"Your Highness, the War Ministry has intervened in the acquisition."
"What?"
The Imperial government, upon being informed that a German-American had acquired a sixty percent stake in Loewe, did not sit idle. To them, Ludwig Loewe & Co. was not merely a company — it was the front line of Imperial security. The government immediately summoned Isidor Loewe and informed him that if the American wished to acquire the shares, he would have to agree to all of the following unofficial conditions.
First, the German government attached strict conditions regarding production.
First. The factories must be maintained within Germany.
Second. Production facilities may not be transferred overseas.
Third. Military supply to the Imperial Army takes priority.
Fourth. Technology may not leak overseas.
Waldemar's camp didn't consider these a major problem. They hadn't been after the technology in the first place.
The Prussian government also wanted stringent conditions on management.
First. A German must be retained in the position of supervisory director.
Second. The arms business may not be spun off.
Third. Defense-related facilities may not be sold.
In short, they wanted the company's current structure left intact. Waldemar's people, who had intended to keep the factories running in Germany anyway, figured they could accept even these conditions — but the Prussian government had more.
This last condition was the real crux of the matter.
The Prussian government argued that, given the sensitivity of a company like Loewe, a foreigner's shareholding must not be excessively high. They demanded that German banks buy back half of the shares the foreigner had acquired. In other words, it was a demand regarding the ownership structure itself.
The German government hereby requires that half of the sixty percent stake acquired by the American party be resold to German banks — or that the contract itself be voided. There is no third option.
"If we accept this, there's no point in investing in Loewe at all."
Waldemar thought the same. He pondered for a moment, then made his decision.
"We'll walk away."
"Your Highness? But—"
"Understood, Your Highness."
Waldemar said as much, but he couldn't help the bitterness in his gut. This was the first time a deal that had already succeeded had been undone by state pressure. He was reminded, viscerally, that matters of national security could not be solved with money.
"Let's take this as a lesson. We've grown too complacent from nothing but success."
"I have no excuse."
"As for the arms industry — we'll wait for the next opportunity."
Waldemar abandoned the Loewe acquisition, chewing over the bitter taste of it. The failure to take Ludwig Loewe & Co. was the first defeat he had experienced in his long streak of victories from the shadows.
He carved this lesson into his bones.