Over 2 years ago, the International Petroleum Investment Company (IPIC) acquired 70% of MAN Ferrostaal AG (later renamed Ferrostaal) from the MAN SE, the German industrial group. MAN retained a 30% stake.  As soon as IPIC agreed to buy, MAN was caught up in a large scandal involving bribes for contracts. While initially the investigation only involved executives in MAN. Ferrostaal was soon caught up in the scandal. A year after the IPIC purchase, two Ferrostaal executives were arrested as part of the investigation.. Since then, Ferrostaal has been fined $378 million by German authorities. MAN has also been slapped by additional fines, which they are still disputing along with the Ferrostaal fine.

While I don’t believe IPIC were, at any point, shocked that Ferrostaal executives were part of a wider bribery investigation, I’m sure they were shocked when it came to the heavy fines. At the time, $378 million was half of estimated value of Ferrostaal.

At part of the original investment, IPIC had the option — which was expected — to be picked up the remaining 30% being held by MAN. IPIC balked. IPIC figured that if they acquired full control of the company, it would be expected to pay the fines. IPIC attempted to received promises from MAN that they would pay any fines that came as a result of the investigation. The last few months have seen a back and forth between the two companies over the dispute. Late in September, word came that IPIC had hired to Morgan Stanley to review their Ferrostaal investment, which could pave the way for IPIC to take their case to court. It now appears that Morgan Stanley, rather than investigating, was trying to work with MAN to find a unique way of getting rid of Ferrostaal.

The details of this unique way came out today. MAN will pay IPIC €350 million ($467 million) for IPIC’s entire holdings in Ferrostaal (Press release). MAN has then, in turn, sold off the entire company to MPC Group for €160 million. MPC is now responsible for paying any fines, and dealing with the now rather chaotic Ferrostaal.  With the deal, IPIC has taken a lost of about $150 million. This prevents the case from ending up in the German courts and means that IPIC has left the German plant building business.