EuroBusiness Media (EBM): Wendel, one of Europe’s leading listed investment firms, held its Investor Day. Frédéric Lemoine, welcome. You are the Chairman of the Executive Board of Wendel and this Investor Day was a chance for you to update us on the levers for growth inside the different portfolio companies. What are some of the takeaways?
Frédéric Lemoine: That was really the motto: growth, growth, growth! We are living in such a sluggish environment, especially in Europe, that we need to look a little bit beyond to North America, which is growing nicely, to Africa, where we are investing heavily, to Asia. And even in France and Europe, we demonstrated this morning that the number of companies are growing in a sound way because they are just based on good economic models. So we had a number of our CEOs – the CEOs of the companies in which Wendel has invested a long time ago or more recently. We started with Didier Michaud-Daniel, the CEO of Bureau Veritas, because it was interesting to show to our financial analysts, to our investors, to our partners, that Bureau Veritas has still a lot of growth drivers supporting its development, both organically and externally, with a lot of companies that are good targets to complement their offer. That was one model. Then we reviewed all our non-listed companies, and there are as many growth models as there are companies. When you take a company like Stahl that has just merged with Clariant’s Leather Services in the chemicals for the leather industry, clearly their merger creates the conditions for a rebound because they have widened the range of services and products to offer. When you look at a company like Parcours or Mecatherm – they are two very different companies, but both in France, based on a very specific model, on a niche market – they are growing very nicely. Parcours at 9% a year. Mecatherm has experienced a very strong growth of their order book: €130 million of order book, never achieved by Mecatherm in the past. And even some companies that have been in a very harsh environment, notably in Southern Europe, like Materis Paints, are in rebound mode and have developed new products, are expanding their network of stores in order to benefit from good internal growth in the coming years. Obviously, the cherry on the cake was IHS because it’s a phenomenal growth that is experienced there with HIS. But each of these companies had their model, including our last very tiny and promising Japanese company, Nippon Oil Pump (NOP), that presented a model they called revolutionary, based on innovative products that are really quantum leaps for their business.
EBM: Now, this Investor Day is held at the end of 2014. That’s not quite half way in the 2013-2017 strategic plan, and yet we can still today give an update and confirm or not the outlook for the rest of the plan?
Frédéric Lemoine: Sure, all these growth drivers drive value creation, so clearly we are on our roadmap for value creation. We are on our roadmap for investment as well. We had said at the beginning of 2013 that we would invest € 2 billion of equity over four years. After a little bit less than two years, we have invested €800 million and we are announcing a new investment today. So it will be close to €1 billion. Clearly, we are doing what we had said. One third of this investment was supposed to take place in Africa. Done: we have invested nearly €700 million in Africa. We said that we would target one third of our investments in North America. With the acquisition of CSP Technologies announced today, it will be not done, but started. That’s a new trend because our previous investment in the US dates back to 2006 with Deutsch Connectors, which was a great success by the way. And one third of our investment is supposed to take place in Europe, and we are working actively on that. We have still more than two years down the road to carry out this objective and I’m pretty sure we will be there. That being said, we are also working qualitatively on the diversity of the businesses and the market trends on which we bet. So we have continued diversifying our portfolio. We have invested in telecom, insurance, machine tools, now plastic packaging – all these areas are absolutely new for Wendel and represent a real diversification, whereas construction only represents 23% of our value today together with renovation, so much down compared to the 60% that we had in the past. We are also following our roadmap from a financial perspective. We have been upgraded to the investment grade status, and obviously, for our shareholders we stick to our commitment to increase the dividend year after year.
EBM: Let’s do a spotlight on CSP Technologies which you have just acquired, so that’s today’s news. What can you tell us about this company?
Frédéric Lemoine: This is really a great company, typically the company we were looking for. This is what we call in our industry a primary deal. We buy the company from a family of entrepreneurs that have developed the company first in the New York State, then in Alabama, and have created a subsidiary in France, which is something that was of interest for us in Alsace, clearly giving us an angle to better understand the company. This company produces vials: high performance vials, notably for the pharmaceutical industry. The type of vials people suffering from diabetes use for their blood strips that they use to test the glucose in their blood, so they need to have some specificities, notably to be desiccant in order to keep the strip in a perfect state. This type of vials is also used in the confectionary industry, in the dairy industry, in other food or consumer goods industries. So the end users are quite different. The customers are everywhere in the world; the plants are in the US and in France, and we see a lot of new applications that could be launched, based on the patent and the innovation capabilities of this company.
EBM: And finally, since the last time we spoke, you increased your stake in IHS. Would you like to make a comment?
Frédéric Lemoine: That’s right. We have deployed now nearly $800 million in IHS. It’s a big success. They have raised the largest capital raise ever in Africa, with $2.6 billion over the summer to finance two major deals when they acquired more than ten thousand towers during the summer, doubling their size. They have achieved this year the objective they had for 2018. It’s a hyper growth that is financed by a string of high-quality shareholders. We are the largest one with about 26% after the capital increase, but you have big names like the GAC of Singapore, Goldman Sachs, Macquarie, or some African investors. We are very confident that it will create a lot of value in the future and we have always said that it was a capital development deal, not an LBO type of deal. It’s a deal for long-term investors that are really able to support the growth and development of the company.
EBM: Frédéric Lemoine, Chairman of the Executive Board of Wendel, thank you very much.
Frédéric Lemoine: Thank you.
