Parisian pioneers

Wendel Investissement has decided to internationalize its operations. Founded in 1704, the Paris-listed buyout firm would not appear to have taken the decision in haste. By Andy Thomson

When US, French and German antitrust authorities in June gave the go-ahead for Wendel Investissement's $1.04 billion (€816 million) acquisition of Deutsch Group, a US-based manufacturer of high-performance connectors for the aerospace and defense industries, it was a seminal moment. Had you listened hard enough in the vicinity of Wendel's Paris headquarters, you might just have detected the sound of champagne corks popping in celebration of the firm's first overseas acquisition.

Wendel has made no secret of its ambition to stretch its operations beyond its homeland. A press release that accompanied the Deutsch deal described it as ?a major step forward for Wendel Investissement as the group broadens the scope of its activities outside of France.?

In a recent interview with Private Equity Manager, Wendel CEO Jean-Bernard Lafonta elaborated on this: ?We currently have €1 billion in equity to invest and we want to increase our deal flow over the next three years,? he says. ?We feel the French market is a significant part of that but it's not enough – we don't want to depend on just one market. Our focus on investing for the long term means it's possible to differentiate ourselves when we are in competition for deals abroad.?

What is more, Wendel's global aspirations involve more than simply registering with investment banks their willingness to undertake transactions overseas in the anticipation that its deal professionals can be parachuted in as and when required. Far from it. Lafonta revealed to PEM that the firm has decided to launch local deal teams. As yet details are scant, aside from the observation that Germany might be an attractive location, while Asia ?could be important.? But while the details may be absent at this stage, the intent is certainly there.

Says Lafonta: ?We will try to get into some attractive local markets by bringing on board individuals that are well connected. We think it would be more effective to have local people – we think it could add value.? But, as befitting a firm that has chalked up over 300 years of history since first acquiring a French ironworks in 1704, it's not in a rush to see the strategy pay off. ?We see this as a long-term opportunity. In the short term, there are big differences from one market to another and, in some countries, the legal frameworks can be a worry. But there are countries of interest to us that we'd expect to see develop significantly over the next 10 to 15 years.?

No novice
None of which should lead to the conclusion that Wendel is a novice at overseas acquisitions: indeed, it has been investing indirectly in foreign markets for many years through its portfolio companies. A number of these are wholly owned subsidiaries, which are effectively investment groups in their own right. Netherlands-based Oranje Nassau, for example, is a wholly owned subsidiary that has been part of the Wendel stable for around 100 years. Focused on coalmining activities until the 1980s, it then transformed itself into a group investing primarily in real estate and North Sea oilfields.

Last year, for example, Oranje Nassau teamed with fellow Dutch oil and gas investor Dyas to acquire Scottish oil exploration group Edinburgh Oil and Gas in a £132 million (€191 million; $243 million) deal. In June, it joined forces with global private equity firm The Carlyle Group to acquire Netherlands-based Stahl Holdings, a chemical products company, in a €520 million deal.

The break with the past is that Wendel is now targeting overseas deals directly. Aside from the claim that, as a listed firm, it is not hamstrung by specified investment horizons and can thus be more of a long-term partner than many of its rivals, Lafonta says it can also position itself to be the investor of choice in situations where an overseas company has significant French operations. This was the reason, he maintains, why financial adviser Lazard brought the Deutsch Group opportunity to his firm.

Though based in the US, Deutsch has operations in 25 countries, with most of its business deriving from the US, French and UK markets. Of the firm's 12 industrial facilities, four are based in the US and three in France. What is more, there is a strong French angle in Wendel's plans for the firm. For one thing, it has named Jean-Marie Painvin, the former head of Deutsch's French entity, as its new chairman and COO. In addition, it will seek to exploit as-yet untapped synergies between the French and US operations in order to increase sales opportunities. For example, Lafonta says connectors produced for France-based aircraft firm Airbus could also be interesting to American rival Boeing, which is ?a very small client [of Deutsch] at the moment.? Such deals could become a Wendel trademark in the years ahead.

From public to private
As Lafonta ponders Wendel's move into global markets, he is unlikely to be intimidated by the challenge. At the youthful age of 39 he was drafted in to head up Wendel in June 2002, and in the years since has done much to transform the firm's business model. At the time he took the reins, Wendel was primarily a holding company with minority stakes in a number of French public companies. Challenged by former CEO and current supervisory board chairman Ernest-Antoine Seillière to find a way of reinvigorating the firm, Lafonta opted to focus on purchasing controlling stakes in unquoted firms in which Wendel would invest at least €100 million.

The firm announced its new strategy in style when, just three months after Lafonta's appointment, it teamed with US buyout giant Kohlberg Kravis Roberts to acquire French electrical equipment maker Legrand for €5.1 billion in September 2002. The deal was the largest buyout seen in Europe at that date. More significantly, it subsequently looked an astute investment when the two private equity firms sold 20 percent of their shares in a Euronext Paris IPO in April 2006. The IPO was 30 times oversubscribed as investors scrambled to buy up shares, even though the firm listed at the top of its price range – forcing the temporary suspension of Euronext in the process.

Nor was the Legrand deal an isolated success. A press release from the firm says that during 2005, Wendel's group value increased by 37 percent and its share price by 57 percent. The same release says that, in May 2006, the firm's net asset value per share had increased to €101, compared with €82 at the end of last year. This will no doubt please Wendel's investor base, which has changed substantially from being comprised of around 50 percent French institutions two years ago to approximately 80 percent Anglo Saxon institutions today.

In line with the increasing internationalization of its investor base, it seems appropriate that Wendel should now step boldly beyond its own borders in search of new opportunities. After 300 years of existence, a brave new world awaits.

Wendel Investissement
Founded: 1704

Office: Paris

Total employees: 49

Key personnel include:

Jean-Bernard Lafonta: CEO

Ernest-Antoine Seillière: chairman of the supervisory board

Bernard Gautier: member of executive board

Jean-Michel Ropert: investment/operations

Christine Dutreil: investor relations

Gérard Lamy: investor relations

Gérard Combes: human resources

Other professionals include: Stéphane Bacquaert, Olivier Chambriard, David Darmon, Yves Moutran, Fanny Picard, Arnaud Descleves, Jean-Yves Hémery.

Investments (industrial):

Legrand: a global specialist in products and systems for electrical installations and information networks in residential properties, service facilities and industry.

Oranje Nassau: in the energy sector, invests in the exploration and production of oil and natural gas mainly in the North Sea, but also in North Africa and the Middle East. Its real estate holdings (more than 70,000 m2) are primarily comprised of offices, commercial properties and showrooms, most of which are located in the Netherlands. Stallergenes: the world's leading pharmaceutical laboratory specialized in allergenic immunotherapy. Allergenic immunotherapy (or desensitization) makes it possible to reorient the immune system by attacking the cause of the disease directly.

Materis: a leading speciality building materials company that regroups activities spun off by the Lafarge group.

Deutsch: a world leader in high-performance connectors in the aerospace, defense, heavy vehicle and oil production sectors. Stahl: speciality chemicals firm specializing in leather finishing and high performance coatings.

Investments (media and services):

Bureau Veritas: an international service provider that works to prevent risks, improve quality, and enhance the safety of people and property.

Editis: France's second largest publishing group and active in four publishing segments – literature, education, reference and services.

Investment (other):

Neuf Cegetel: Neuf Cegetel was born from the merger of Neuf Telecom and Cegetel, the two main players to emerge from the liberalization of the fixed telecommunications market in France.