Chapter 24 Raising Funds
"Sir Ernst, if you have no objection we can sign this agreement."
Ernst carefully reviewed the agreement one last time and signed his name on it.
The visitor was from the Prussian royal family. Recently, there was a heated debate in Prussia over the privatization of the Cologne-Minden railway.
This shows that the Kingdom of Prussia was raising war funds by any means necessary, and Ernst, who was also a big fish, fell into the eyes of Prussia.
After all, the Hechingen Consortium is now a star enterprise in the whole of Germany. It owns a large bank, a world-class daily necessities company, and Hechingen Tobacco...
The huge amount of wealth that Ernst quickly accumulated in a short period of time naturally attracted attention. Fortunately, Ernst was indeed a second-generation rich man and had no inspirational experience of rising from the grassroots. Compared with the geniuses of his generation who started from scratch, he was indeed not very conspicuous.
But wealth cannot deceive people, and the Prussian royal family knew this best because they themselves were Ernst's clients.
The purpose of the Prussian royal representative's visit to Ernst is self-evident. Compared with selling strategic facilities such as railways, it is better to think of solutions from other aspects first.
The Cologne-Minden Railway is one of the earliest railway lines built in Prussia. Its design began in 1833 and it was fully completed in 1859, becoming the hub of the Prussian railway system.
The railway project was originally intended to transport coal from the Ruhr region to Prussia's industrial production base at a low cost.
In fact, the Cologne-Minden Railway was a large-scale public infrastructure project led by the Prussian government from the very beginning. The Prussian government directly purchased 1/7 of the original shares and used 14 million Thalers to guarantee the railway bonds issued at a coupon rate of 3.5%.
In return, the government could buy the company's outstanding shares in installments and eventually become the railway's sole shareholder, completing a gradual nationalization.
The nationalization of railways was a strategic decision made by Prussia, because Prussia valued the railways' ability to transport troops and supplies.
However, the conflict between Prussia and Austria was intensifying, and the top Prussian government officials were actively preparing for war.
However, war cannot be separated from financial support, and the Cologne-Minden Railway was brought up for discussion in this context.
Bismarck's war preparations against Austria required a total of about 60 million Thalers. The burden of raising such an astronomical amount of war expenses fell on the shoulders of Bleischröder.
In fact, as early as December 1862, after careful calculations and repeated considerations, Bleischröder had proposed a highly controversial plan to privatize the Cologne-Minden Railway.
The core part of the plan was that instead of the government spending huge sums of money to fully acquire the shares of the railway company in 1870, which would put huge pressure on the finances, the Prussian government would immediately receive compensation from the railway company at the cost of giving up nationalization, and at the same time give up the guarantee of bond interest, so that part of the 14 million thalers deposit could be immediately mobilized.
As soon as the plan was released, it was opposed by many people who believed that the Brayschroeder Plan would allow shareholders of the railway company, including Brayschroeder himself, to make huge profits at the expense of the government's long-term losses. In this plan, the government would lose a total of 30 million thalers in various rights and interests, and in return only 10 million thalers in compensation and 4 million thalers in available deposits.
The Cologne-Minden railway, which has already been developed, is a very profitable project among government investments. The privatization plan can provide the government with emergency funds in the short term, but the price paid is selling excellent assets at a price of less than 50% off, while also losing the right to long-term income in the future. It is not a good deal for the government in any case.
Ernst also knew from history that the unified Germany eventually nationalized the railways, so the current railway privatization was just a sacrifice that had to be made.
But it is impossible to expect capitalists to do good things. They pursue higher profits, so there is no such thing as patriotism.
The Rothschild family was behind the privatization of Prussian railways, and Bleischröder was their employee.
The Rothschild family’s current headquarters is in Vienna, Austria. It is not an exaggeration to say that they have Austrian nationality, but they are preparing war funds for the enemy country.
They are indeed not particular about their work, but the benefits they gain are real. If it were in the East, the Rothschild family would have been executed by the emperor long ago.
In other words, it is the current social system in Europe that protects them. Of course, this has little to do with Ernst.
What Ernst cared more about was the agreement in front of him, which was the result of bargaining between the Prussian royal family and Ernst.
Although Ernst is very rich now, he has a lot to do, especially the development of the East African colonies, population migration, food reserves, production tools, colonial weapons and equipment, and staff salaries all of which he needs to pay for himself.
Therefore, after deducting the operating funds needed for the entire consortium, the expenses of the East African colonies and the reserve emergency funds, only a few million thalers were available. However, this was enough. The Prussian royal family did not expect too much. A few million thalers was considered a huge sum of money in that era. You have to know that when the Cologne-Minden Railway was privatized, the Prussian government could only get the initial 4 million thalers.
One of the important reasons why the Prussian royal family sought help from Ernst was that they hoped that Ernst would be more conscientious than those banks and consortiums that only pursued economic interests.
After all, Ernst is one of us, a member of the Hohenzollern family. Ernst does not really need any railway debts. Now Ernst is eyeing East Africa.
So Ernst also pointed out the benefit, which is that in the future Prussia must guarantee the interests of the Hechingen royal family in East Africa.
Prussia’s top priority now is to unify Germany, and it doesn’t care much about colonies. Since Ernst hopes that after Prussia unifies Germany in the future, it will support all of Ernst’s interests in East Africa, then he should support it.
So the two sides signed an agreement, which included the Prussian government, the Prussian royal family and the Hechingen consortium represented by Ernst.
The specific content is that the Hechingen Consortium will invest in the acquisition of 40% of the government shares in the Cologne-Minden Railway, and the Hechingen Consortium will not prevent Prussia from buying back Ernst's shares in the Cologne-Minden Railway at a price higher than the market price in the future.
This was actually a trick of transferring money from one hand to the other. Ernst used the idle funds to give them to the Kingdom of Prussia to participate in the war. After the war, as long as Prussia paid off the accounts, it could take back the railway as national property.
Of course, Ernst's efforts were not in vain. As a price, the unified German government had to recognize the Hechingen royal family's ownership of the East African colonies and support the expansion of the Hechingen consortium throughout Africa.
Although this gentleman's agreement is not safe, it can avoid many troubles. The German East Africa in the previous life would have completely lost its basis and legal basis for existence. This time it is the territory of the Hechingen royal family.
As a supplement to the agreement, Ernst also took advantage of this opportunity to get the long-desired ticket.
(End of this chapter)
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