Esselte

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Esselte

U.S. Headquarters:
44 Commerce Road
Stamford, Connecticut
U.S.A.
Telephone: (203) 355-9000
Fax: (203) 355-9071
Web site: http://www.esselte.com

Private Company
Incorporated: 1913 as SLT
Employees: 6,500
Sales: $1.2 billion (2003)
NAIC: 422120 Stationery and Office Supplies Wholesalers; 333313 Office Machinery Manufacturing

Esselte is the world's leading office supply manufacturer with customers in 120 countries across the globe. The company has over 30,000 items in its product arsenal including file folders and ring binders, staplers and desk accessories, printers and labels, and computer accessories. These products—found under the DYMO, Esselte, Leitz, Pendaflex, and Oxford brand names—are sold to wholesalers, office supply stores, and mass retailers. J.W. Childs Associates L.P., a private equity investment firm, acquired the company in 2002.

Esselte was born out of the 1913 union of 13 Swedish printing businesses, some of which had been in operation since the 1600s. The merger consolidated the operations of all 13 companies into an entity known as the SLT group, creating one of the largest graphics firms in the region. SLT grew substantially over the next 50 years, adding a variety of different operations to its holdings through strategic acquisitions. By the 1950s, the company printed stationary, playing cards, maps, forms, share certificates, and bonds, and was also involved in book binding and paper manufacturing.

It soon became apparent however, that SLT's unwieldy group of companies was not operating efficiently. Thus, it launched a major restructuring effort in the early 1960s in an attempt to streamline operations. It sold off unprofitable businesses combined similar divisions. The reorganization proved successful, and in August 1970 the company, now organized as a top office supplies concern, adopted the name Esselte AB.

Rapid Growth in the 1970s–80s

As a result of the restructuring process, Esselte found itself in an enviable position. With annual sales of over $300 million, almost no debt, and cash to spend, the company embarked on an international expansion plan that would eventually catapult it into the top spot in the industry. Under the direction of managing director Sven Wallgren, Esselte made its first key move by acquiring Benson's International Systems Ltd., the world's largest producer of ring binder mechanisms, in 1975.

The shopping spree continued. Esselte gained a foothold in the U.S. and Canadian markets in 1976 when it bought Oxford Pendaflex Corporation, a company with $60 million in annual sales, best known for its suspension filing systems. Two years later, Esselte moved to take over DYMO Industries Inc., a California-based embossing company, whose products Esselte already distributed abroad. DYMO resisted the acquisition, seeking a white knight in Daylin Inc. Esselte won out in the end, however, topping Daylin's bid by 40 cents per share. The $43.5 million purchase brought with it DYMO's well-known label makers and tapes, Ideal accounting books, and the Meto bar-coding business. As Esselte made the deal under the auspices of the Pendaflex subsidiary, Pendaflex absorbed DYMO's business.

By the early 1980s, over half of Esselte's revenues stemmed from operations outside of Sweden. A September 1981 Financial Times article summed up Wallgren's acquisition strategy as consisting of two principles: "acquisitions should possess a strongly defined market or technical characteristic and secondly that they should have greater growth and profit potential than the parent company." In keeping with this logic, the company added Letraset Ltd., a large graphic design and technical drawings products supplier, to its holdings in 1981. Overall, the company bought more than 150 companies over the next ten years.

In 1984, Esselte combined Pendaflex and three other holdings to create U.S. subsidiary Esselte Business Systems Inc. (EBS), which it then positioned to take on a significant share of the $35 billion office supplies market in the United States and Europe. Esselte took EBS public—selling 3.3 million shares at $13.50 per share—and EBS began to grow by acquisition, purchasing looseleaf binder and supplies manufacturer Boorum & Pease in 1985. By 1987, EBS accounted for 60 percent of Esselte AB's sales and nearly 80 percent of its earnings. Esselte announced the following year that it would focus solely on its EBS unit and its Information Systems and Media (ISM) business. The latter included office equipment importing operations and its entertainment holdings that included pay television ventures.

Changes in the 1990s

During the late 1980s, Esselte entered the retail outlet market through a series of acquisitions including Einersen of Norway. This move into the retail sector proved ill-considered as the company began competing with many of its customers. Esselte's fortunes began to change as a recession slowed its customers' spending. Profits fell and sales in its key markets faltered. In 1990 its major shareholder, Mobilia, declared bankruptcy. By now, Esselte was plagued by many of the same problems it had faced in the 1960s when it was forced to undergo a major overhaul. Hans Larsson, Esselte's CEO at the time, insisted the company restructure in order to shore up profits. In May 1990 Larsson's management team agreed and set plans in motion to sell off its commercial real estate, printing, and publishing businesses. The firm also bought back the shares of EBS it didn't already own, making it a wholly-owned subsidiary. Despite these efforts, pre-tax profits fell by 75 percent that year.

Cost cutting measures and job cuts continued in 1991. During a management shakeup, Larsson was ousted, and Bo Lundquist was named CEO. He reorganized the company into three main business segments—Esselte Office Products, Esselte Information Systems, and Esselte Retail and Equipment. One year later Esselte was split into two separate companies. Esselte would remain involved in office products with the following divisions: Esselte DYMO; Esselte Pendaflex; Esselte Bensons; Esselte Letraset; and Esselte Meto. The second company, Scribona, included Esselte's Nordic information systems arm.

The trimmed-down Esselte had five major goals after the demerger. Lundquist outlined these initiatives in his annual speech to shareholders in 1994. According to the CEO, Esselte's focus at this time was on strengthening its market positions; securing cost savings by streamlining operations, enhancing efficiency, an capitalizing on synergies; looking for new product opportunities that were made possible by advances in new media and electronics; maintaining an aggressive product launch schedule; and strengthening the company's overall financial performance. Lundquist reiterated this strategy in a 1994 interview with the Wall Street Journal. "Regarding Esselte's greatest growth opportunities over the next three to five years," he summed up, "We will have a concentration to office products, pure niche product coming from the electronic development and from the new information technology. And this is our core, and we are large, and will still be in the retail sales and equipment. We have not any other plans to go into new businesses."

Esselte's restructuring efforts over the past several years appeared to be paying off. As profits began to rise, the company resumed its expansion strategy. At this time Esselte looked to expand geographically, looking toward the Asian, Eastern European, and South American markets as potential new growth areas. The company bolstered its existing product line in 1996 with the acquisition of U.S. computer products manufacturer Curtis Manufacturing Company. It also bought Karl Bene & Company, Austria's largest office supply company.

The Late 1990s and Beyond

Lundquist resigned in 1997, leaving Jan Kvarnström at the helm. Esselte once again revamped its operations under new leadership. It adopted a holding company structure with three independent subsidiaries—Esselte Office Products Inc., Meto, and Nielsen & Bainbridge. The latter was divested in 1998, positioning Esselte to focus on its office products business and Meto subsidiaries.

Esselte's office products arm purchased L. Leitz International GmbH for $337.7 million in 1998. By adding Germany's largest office supply manufacturer to its arsenal, Esselte secured a position as the world's leading manufacturer in the office supplies industry. The two companies fit well together, and Esselte gained a stronger foothold in markets where its performance had traditionally been weak. Leitz's past investment in automation and technology was also considered a benefit and was expected to add cost savings to Esselte's existing operations. The company also acquired U.S. printer label manufacturer CoStar that year.

Meto was sold to shareholders in 1999 in a move that pared Esselte down to its Office Products business. Kvarnström moved into the chairman position that year, and Anders Igel was named CEO. By now, Esselte had undergone an intense transformation, changing from a large conglomerate into a streamlined office products supplier. The dramatic changes positioned it to face the challenges of the new millennium which included a severe recession and weak economies that affected most of the company's markets. The firm continued to take action in order to maintain profitability. It divested its Monti printing business in 2000 and its Letraset graphics and Tarifold filing system holdings in 2001. That year it also restructured its Curtis operations.

Company Perspectives:

We strive to make it easier for people to organize the modern workplace. We work close to our customers and help them conduct a profitable business. They get easy-to-sell products with strong brands. They also get a reliable partner with a superior service level and with local and global presence.

Perhaps the most significant move in the company's history came in 2002 when J.W. Childs Associates L.P., a Boston buyout firm, made a $550 million cash offer for Esselte. This type of transaction, a public-to-private-buyout, was gaining popularity in Europe. Before 1999, the value of such deals in Europe hovered around EUR 300 million. By 2001, the value of this type of buyout had reached EUR 6 billion. J.W. Child's purchase was expected to boost profitability in Esselte, and this prompted company board members to recommend the offer. Esselte's largest shareholder, Ratos, agreed to sell its interest to J.W. Childs in May 2002. The transaction was completed in July. Magnus Nicolin was named Esselte's new president and CEO.

As a private company, Esselte had the financial wherewithal to pursue an aggressive growth strategy that included geographic expansion, acquisition, and investment in current brands. Nicolin commented on Esselte's new parent in a May 2003 Office Products International article. "JW Childs is a strong owner and is more committed to the company's growth," he claimed. "It has the desire to add value and support new initiatives." Holding JW Childs to its word, Esselte made several key moves after the change in ownership.

In August 2002 the company revamped its sales and marketing operations in Europe and created the Esselte Sales Group Europe division to provide enhanced customer services, support, and trade marketing. It completed a management realignment in 2003 and set several initiatives in place that increased productivity and operational efficiency and improved waste reduction. Acquisition activity also resumed with the purchase of the consumer products division of Centis Inc. in March 2003. The deal included JM, Duo Tang, Century Craft, and Centis Canada, which were integrated into Esselte's Filing Americas division.

The company's key brands at this time were Pendaflex, DYMO, Esselte, and Leitz. It added the Xyron brand to product line in October 2003. In early 2004, Esselte bought Universal Trade Stationers, leading to the creation of its first office in Ireland. It also purchased EJA CZ of the Czech Republic. In May 2004 it completed a EURO 150 million bond offering.

In the coming years, Esselte planned to strengthen its brands through product innovation, marketing and investment, and by expanding its customer base. Additional growth in China, one of the fastest-growing countries in the world, and in the Eastern European region was at the forefront of Esselte's expansion strategy. J.W. Childs' cash infusion came at a crucial moment in Esselte's history and left it well positioned in the industry. Esselte had indeed experienced a wave of changes over the past decade but it appeared as though it was on track for growth in the years to come as the world's largest office supply manufacturer.

Principal Subsidiaries

Esselte Sverige AB (Sweden); Esselte UK Ltd.; Esselte Leitz GmbH & Co. KG (Germany); Esselte de Mexico S.A. de C.V.; Esselte S.A. (France); Esselte Canada Inc.; Esselte S.r.l. (Italy); Esselte Australia Pty Ltd.; Esselte Ltd. (Hong Kong).

Principal Operating Units

Filing Americas; Filing Europe; Sales Group Europe; DYMO; Workspace; Esselte Asia Pacific.

Principal Competitors

Avery Dennison Corporation; MeadWestvaco Corporation; Smead Manufacturing Company.

Key Dates:

1913:
Thirteen Swedish businesses join together to form SLT.: 1964:
The company launches a major restructuring effort to streamline operations.: 1970:
SLT changes its name to Esselte AB.: 1976:
Oxford Pendaflex Corporation is acquired.: 1978:
Esselte purchases DYMO Industries Inc.: 1981:
Letraset Ltd. is added to the company's holdings.: 1992:
Company operations are split into two companies.: 2002:
J.W. Childs Associates L.P. acquires Esselte.