Fimalac S.A.

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Fimalac S.A.

97, rue de Lille
75007 Paris
France
Telephone: ( + 33) 1 47 53 61 50
Fax: ( + 33) 145554596
Web site: http://www.fimalac.com

Public Company
Incorporated: 1996 as Financière Marc de Lacharrière S.A.
Employees: 10,003
Sales: EUR 1.58 billion ($1.4 billion)
Stock Exchanges: Euronext Paris
NAIC: 551112 Offices of Other Holding Companies; 551114 Corporate, Subsidiary, and Regional Managing Offices

French holding company Fimalac S.A. (named for founder and financier Marc Ladreit de Lacharrière) wants to transform itself into a global “business-to-business” services Internet company. As such, the group has abandoned a number of its original investments—including magazine publishing and real estate—to refocus itself around three main axes. The first sector is credit rating services, through its Fitch IBCA holding, which accounted for 17 percent of Fimalac’s revenues in 1999. In 2000, Fimalac boosted its credit rating division with the acquisitions of Duff & Phelps Crédit Rating and the BankWatch unit of Canadian publisher Thomson. The company’s credit rating segment is also a driving force behind the company’s growing Internet-based activity. Handtools and automotive and garage parts, tools, and equipment is the company’s largest division, established through Fimalac’s surprise—and hostile—takeover of Facom S.A. in 1999 and boosted by the FFr 3.6 billion acquisition of Autodistribution, a specialist provider of parts for the automotive aftermarket in that same year. The Facom component contributed 45 percent of Fimalac’s 1999 revenues. Fimalac’s third major area of operations revolves around its industrial holdings, which include its CLAL-MSX subsidiary and the related Engelhardt-CLAL joint venture, which produce metal alloys; LBC, the world’s number two provider of chemical storage facilities and services, with more than two million cubic meters of storage space. LBC, for Lille Bonnières Colombes, was one of the original Fimalac holdings. The company’s industrial and manufacturing segment also includes Secap, a maker of postage and franking machines and other office-related equipment. Long criticized as a mishmash of unrelated activities, Fimalac’s attempt to reposition itself as a “business-to-business” provider with an Internet focus (the group claims as much as 50 percent of its revenues will be generated through Internet sales in the year 2000) also seeks to boost the value of its stock by enabling the company to be assessed for the worth of its holdings, rather than as a holding company (the company estimated its share price to be as much as EUR 50 per share too low in 1999). Such a revaluation would at least benefit Marc Ladreit de Lacharrière, the company’s founder, chairman, president, CEO, and holder of nearly 88 percent of the company’s shares.

Holding Financial Clout in the 1990s

The formation of holding company Fimalac S.A., for Financière Marc de Lacharrière, in 1991 was merely a consecration of nearly 20 years of financial investments for its founder Marc Ladreit de Lacharrière. A member of France’s former nobility (who, although stripped of their aristocratic status after the French revolution nonetheless remained influential in the country’s political and financial circles), de Lacharrière was something of a maverick in his youth—after founding, then selling the highly successful teenage fashion magazine Made-moiselle, de Lacharrière joined the Ecole Nationale d’Administration (ENA), the breeding ground of France’s political (and financial) elite. Yet de Lacharrière soon surprised his peers, who included future political leaders and economic kingpins, such as Louis Schweitzer, later named as head of the government-owned automaker, Renault, by refusing to join the French civil service directly upon his graduation—something unheard of among EN A graduates.

Instead, de Lacharrière rejoined the commercial world, first joining the banking industry, with the Banque de Suez (later the Banque Indosuez). In 1976, de Lacharrière left the Banque de Suez to become financial director of French cosmetics power-house L’Oréal. De Lacharrière went on to a brilliant career at L’Oréal, rising to the number two position in less than ten years, when he was named vice-president in 1984.

Yet Lacharrière already had begun leading a double life before joining L’Oréal—that of financier. One of de Lacharrière’s first investments was that of publisher Editions Masson, which de Lacharrière bought in 1973. Publishing was to continue to be one of de Lacharrière’s main “hobby” interests, as his holdings grew to include publishing group Valmonde and such diverse titles as the weekly Le Journal des Finances, Valeurs Actuelles, and the high-brow intellectual magazine Revue des Deux Mondes, originally launched in 1829.

De Lacharrière’s investment interests continued throughout his career at L’Oréal at the same time that he was helping that company capture one of the world-leading positions in the cosmetics industry (and generating a personal fortune as reward for his part in L’Oréal’s success). However, de Lacharrière’s personal fortunes were aided by his outside investment interests as well. During the 1980s, a number of de Lacharrière’s investments hit the jackpot, as it were, as he received the benefits of such events as the hostile takeover of insurance group Victoire by the Banque Suez. While his interests in Centenaire Blanzy— fused into Fimalac in the late 1990s—also were generating strong dividends, de Lacharrière built up a strong real estate portfolio that was to provide the basis for his group’s Sefimeg subsidiary. At the same time, de Lacharrière also served as an administrator for acquisition-hungry Crédit Lyonnaise, a position he was to hold until 1993.

Financier to Internet Industrialist for the 21st Century

At the beginning of the 1990s, de Lacharrière once again surprised his peers when he resigned from L’Oréal at the age of 50 to devote his attentions to his growing financial holdings. One of de Lacharrière’s first moves as a newly “free-lance” financier was the takeover of Lille Bonnières et Colombes (LBC), one of France’s leading chemical storage services providers. The LBC takeover also gave de Lacharrière a publicly quoted company to run.

During the first half of the 1990s, de Lacharrière continued to build up his interests, grouping his various holdings under a number of publicly listed holding companies, including LBC, Alspi, Comptoir Lyon Alemand Louyot, Centenaire Blanzy (in which de Lacharrière built up controlling interest in the late 1990s), and Clal, the specialty metals and alloys producer.

In 1992, de Lacharrière decided to launch his growing portfolio into a new direction, and he acquired controlling stakes in France’s Sofres, a public research company, and followed that acquisition with the takeover of Secodip, making Sofres the leading market research company in France. After Sofres was acquired by Taylor Nelson AGB (creating Taylor Nelson Sofres Pic), de Lacchariere’s share of the new company, one of the world leaders, remained at 11 percent.

Meanwhile, de Lacchariere had brought his interest to bear in another new area, when his holding company acquired International Banking and Crédit Analysis (IBCA), a London-based bond ratings firm with a specialty in the banking sector, in 1993. IBCA, founded in 1978 by Robin Monro Davis, who continued to lead the company after its acquisition, was the only non-American ratings firm admitted as a Nationally Recognized Statistical Rating Organization (NRSRO) by the Securities and Exchange Commission. With the Sofres and IBCA acquisitions, de Lacharrière had correctly recognized the growing trend toward such information services, a market that was to see a full boom by the mid-1990s. Under de Lacharrière’s control, both IBCA and Sofres grew to become leaders in their sectors, expanding their range of services as well as building their position through acquisitions. Following the acquisitions of these interests, de Lacharrière sold off his stake in Editions Masson.

Often described as a “mishmash” of “bric-a-brac,” de Lacharrière’s varied holdings—based on a “cascade” model of publicly quoted holding companies that had been popular among French financiers in the 1980s—had grown to more than FFr 8 billion in revenues. In the mid-1990s, however, de Lacharrière joined a growing trend toward unified holdings. The first stage of the creation of a new, simplified investment structure was taken in 1996, when the Lille Bonnières et Colombes holding absorbed the Alspi and Clal vehicles to create the single Fimalac S.A. (which stood for Financière Marc de Lacharrière) holding company. The simplification of de Lacharrière’s holding company’s and Fimalac’s structure continued into 1998, when Centenaire Blanzy (by then de Lacharrière had built up more than 85 percent of that group’s voting rights) was merged into Fimalac. These dealings led to complaints from the various minority shareholders in de Lacharrière’s holdings; de Lacharrière was criticized for “juggling” with his companies and employees without consulting his minority shareholders.

Key Dates:

1991:: Marc Ladreit de Lacchariere acquires publicly listed Lille Bonnières et Colombes (LBC).
1992:: Company acquires Sofres.
1993:: Acquires IBCA; Sofres acquires Secodip.
1996:: LBC acquires two other publicly quoted de Lacchariere holding companies, renames as Fimalac S.A.; IBCA acquires Quest insurance ratings provider.
1997:: Fimalac defines new “business to business” strategy, divests its publishing and real estate holdings, agrees to merge Sofres into Taylor Nelson AGB; IBCA acquires Fitch’s Investors Services, renaming it Fitch IBCA.
1999:: Fimalac takes over Facom S.A.; Fitch IBCA acquires Duff & Phelps and BankWatch.
2000:: Fimalac announces intention to boost its Internet-based business.

The lack of transparency among de Lacharrière’s holdings and the lack of focus among Fimalac’s business areas mean-while continued to depress the group’s stock price, as the Paris stock market remained wary of diversified holding companies. In part in response to this situation, de Lacharrière and Fimalac devised a new strategy designed to clarify the holding company’s direction. Beginning in 1997, the company identified its future focus as that of a “business-to-business” company. As such Fimalac began divesting itself of various interests, including its Sefimeg real estate group, sold to fellow financier Francois Pinault, followed by the sales of its Valmonde publishing holdings, and then its interests in the market research sector, through its shares of Sofres.

The redirection of the company continued through 1998, as Fimalac pared down to a new core of holdings, including its Clal precious metals and alloys transformation unit, which produced specialty metals for applications ranging from dentistry to jewelry (and which accounted for some 65 percent of revenues in 1998), the Secap-Anfa business machines group, and Fimalac’s LBC chemical storage arm. If Fimalac maintained a strong industrial component to its holdings, its attention also had been drawn to the rapidly growing “information age.” In 1996, Fimalac’s IBCA ratings company moved into the largely protected—because of the heavy cost of start-up investments— American market with the acquisition of American insurance rating company Quest. Then the company moved to claim a place among the top three ratings companies worldwide, behind Moody’s and Standard and Poor, when it acquired the United States’ Fitch Investors’ Services, for US$175 million.

The renamed ratings company, Fitch IBCA, continued to drive Fimalac’s growth into 1999, when the company added two more North American companies, bond rater Duff & Phelps, and then bank ratings company BankWatch, formerly part of Canada’s Thomson publishing group. Yet in mid-1999, de Lacchariere added a new dimension to the company when it launched a hostile takeover for France’s hand tool and automotive aftermarket leader Facom S.A. An unusual move for de Lacchariere, the Facom takeover proceeded on a more or less friendly basis after Fimalac raised its purchase offer. De Lacchariere then put friend Alain Gomez, former head of French electronics giant Thomson S.A. in place as CEO of Facom.

By 2000, de Lacchariere and Fimalac, in a continuing quest to boost the company’s stock market valuation, were proclaiming their conversion to the religion of the “new Internet economy”; by the end of the year 2000, the company expected some 50 percent of its sales to come through the Internet, driven not only by the strong on-line services offerings of its Fitch IBCA subsidiary but also by Facom’s strong internet presence. But Fimalac promised to go further, as de Lacchariere announced his company’s readiness to invest whatever funds necessary to build its share of revenues provided through the Internet, including an interest in acquiring businesses directly involved in the booming “e-business” sector in the early years of the new century.

Principal Subsidiaries

CLAL-MSX S.A.; CLAL US Eurl; Engelhard-CLAL SAS (50%); Facom S.A. (93.75%); Financière SECAP S.A.; LBC S.A.; Minerals & Engrais S.A.; Rhenameca S.A.; SEFI SNC; Fimalac Inc. (U.S.A.); Fitch IBCA Inc.

Principal Competitors

Cookson Group plc; Dun & Bradstreet Corp.; Emerson Electric Co.; GATX Corp; Inco Limited; Invensys PLC; Johnson Matthey PLC; Metals USA Inc.; Moody’s Corp; Neopost S.A.; Rio Algom Ltd; Robert Bosch GmbH; Ryerson Tull Inc; SaintGobain S.A.; Snap-On Inc.