MCH and Corona: Who covers the damage?

Bernd Stadlwieser, CEO MCH Group, says that the stability of the MCH Group is not at risk.

On Friday, 6 March, the MCH Group published a press release with the title "Coronavirus: stability of the MCH Group is not at risk". But it is planning cost-cutting measures to reduce personnel costs. This follows the cancellation of Art Basel Hong Kong in 2020 due to the coronavirus and the fact that numerous major exhibitions in Switzerland, such as Baselworld, Giardina and SmartCity, fell victim to the Federal Council's ban on events.

Who pays for the damage?

Who will now pay for the damage incurred and what exactly does it consist of? As early as the beginning of February 2020, the MCH Group promised exhibitors at Art Basel Hong Kong that it would refund 75 percent of the stand rents for the exhibition that did not take place in March. Exhibitions such as this or Giardina in Zurich were in part already under construction. Who will now bear this additional loss for the exhibitors and, if necessary, the stand builders? And can exhibitors even claim damages for lost business?

MCH company spokesman Christian Jecker says in the Basel Newspaper on March 5: "We're currently checking with insurance companies to see if the trade show cancellations (note: probably not just Art Basel Hong Kong) are covered."

The 2019 and 2020 financial years are likely to tear a hole in the MCH Group's income statement. How can impending losses be covered now? The stability of the MCH Group was not at risk, MCH CEO Bernd Stadlwieser (pictured above) said in the March 6 press release. MCH company spokesman Christian Jecker told the Basel Newspaper on March 6 "It's not that it's a matter of survival for us now." According to the Basler Zeitung, however, the MCH Group's liabilities of 410 million francs exceeded its equity by 700 (!) percent. A debt ratio of 200 percent would be considered "healthy". First of all, someone wants to understand both. Even major shareholder Erhard Lee of the investor group AMG, which had demanded an extraordinary general meeting in January 2020, says "I don't think the group will get into a financial emergency." A different view is held by Basel Councillor David Wüest-Rudin in the Basel Newspaper: "The situation is worrisome."

The assets of the MCH Group

The MCH Group has assets with the relatively young or modernized exhibition centers in Basel and Zurich in attractive inner-city locations, Art Basel, which is estimated at 200 - 300 million Swiss francs, and Live Marketing Solutions, the service companies for the core business of marketing events (=exhibitions and events).

Assets are one thing, but how can the imminent and previous losses of the MCH Group be covered? The corona virus could now accelerate the process of selling Live Marketing Solutions with Expomobilia, MCH Global and the American exhibition construction company MC2. That could flush much-needed cash into the coffers and relieve the operating expenses of some 500 of the 950 or so employees. Then there are allegedly always interested parties in Art Basel. According to the news platform "Switzerland News", however, the MCH Group does not want to sell the flagship. If the MCH Group wants to keep Art Basel, this would be another indication that the LMS must now be sold. Again, it is possible that Corona will throw a wrench in the value of this asset, as it has already done with Art Basel Hong Kong, which had to be canceled in March 2020 because of Corona. After all, the value of a trade fair can only be measured by when it actually takes place.

The Corona virus has stopped the trade fair business in Switzerland and elsewhere (Germany) in one fell swoop.

An event ban is too short-sighted

Unsurprisingly, the MCH Group share price now stands at 18.50 francs (March 8, 2020). On 29 November 2019, it was still at 29.60 francs. As if the MCH Group did not have enough to do with itself following the downward trend in the exhibition business in Switzerland, it is now facing the biggest test in its history thanks to Corona.

But it is probably clear to everyone that the effects of the Corona crisis cannot be dealt with by one group of companies alone. The Swiss Federal Council should now, until March 15, work hard on what it can do for the Swiss event industry. Its further decline must be prevented wherever possible, its economic impact is too great. Where there are no more trade fairs, first the trade of the stand builders, then the other trade fair service providers and finally the trade directly will suffer, together this could trigger an unintended wider circle of negative economic effects of which we may not even be aware yet. Therefore, an event ban alone falls far short.