Groupe Bourbon S.A.

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Groupe Bourbon S.A.

La Mare
97438 Sainte Marie, Réunion
Réunion Island
France
Telephone: (+262) 262-53-24-00
Fax: (+262) 262-53-24-01
Web site: http://www.groupe-bourbon.com

Public Company
Incorporated: 1948 as Sucreries de Bourbon
Employees: 7,644
Sales: EUR 940 million ($985.7 million)(2002)
Stock Exchanges: Euronext Paris
Ticker Symbol: GBB
NAIC: 488330 Navigational Services to Shipping; 483211 Inland Water Freight Transportation; 488320 Marine Cargo Handling; 445110 Supermarkets and Other Grocery (Except Convenience) Stores; 424410 General Line Grocery Merchant Wholesalers; 424420 Packaged Frozen Food Merchant Wholesalers; 452111 Department Stores (Except Discount Department Stores); 483111 Deep Sea Freight Transportation

Former sugar cane producer Groupe Bourbon S.A. has refocused itself at the beginning of the 2000s to concentrate on two core divisions: Maritime and Retail Distribution. The group's Maritime division is rapidly becoming a major shipping force with a specialty in four areas: Towing, Offshore Towing and Salvage, Offshore Services, and Dry Bulk Transport. Towing, chiefly through subsidiary Les Abeilles, is Bourbon Maritime's largest operation, providing tug and related port services in most of France's ports as well as in the Indian Ocean and South Atlantic. Related company, Les Abeilles International, provides towing, salvage, and shore-line protection services for the offshore market, principally in the English Channel. The group's Offshore operations focus on the deepwater market in West Africa, the Gulf of Mexico, and, through Bourbon's 50 percent stake in Delba Maritime, in Brazil. The company's Dry Bulk Transport division operates under subsidiary Setaf-Saget, which has been rebuilding its fleet to focus on 40,000-ton-plus handy-max vessels. If Groupe Bourbon intends to become exclusively a shipping company by 2010, it remains for the time being the major retail distribution group on Réunion Island, operating four Cora branded shopping malls and 15 Score supermarkets under subsidiary Vindémia. The company is also the leading retailer in Mauritius, and has a strong presence in Madagascar, Vietnam, and Mayotte. The company expects to operate more than 100,000 square meters of selling space by 2005, 50 percent of which will be outside Réunion. Nonetheless, Groupe Bourbon expects to exit the retail market and has already sold a 33 percent stake in Vindémia to French retail giant Casino, which is expected to acquire the remainder by 2007. Groupe Bourbon is led by Jacques de Chateauvieux and is listed on the Euronext Paris Stock Exchange.

Uniting Réunion's Sugar Growers in the 1940s

Prior to World War II, the sugar cane industry on Réunion Island, one of France's overseas departments, had been fragmented among a number of small, family-owned sugar-producer plantations, or "sucreries." However, the need to rebuild the cane industry's infrastructure following the war brought together a number of families, including the Hulot and de Chateauvieux families. In 1948, these families founded Sucreries de Bourbon, merging their holdings and beginning a modernization of their production facilities.

Sucreries de Bourbon remained close to its specialty, producing sugar and rum for the French market. By the late 1970s, the group emerged as the leading sugar-producer on Réunion Island. Nonetheless, with sales of just FFr44 million, Bourbon remained a tiny player in the global market. At that time, there were still some eight sugar production facilities located around the island.

Faced with heavy competition and fixed European sugar prices, Bourbon turned to Jacques de Chateauvieux, son of one of the company's founders, to lead it into a new era. Born on Réunion, educated largely in France, and holding an MBA from Columbia University, Jacques de Chateauvieux left his job at the Boston Consulting Group to take over Bourbon. The young de Chateauavieux, then just 28 years old, led the group on a restructuring drive over the next decade, shutting down six of its sugar refineries and refocusing production on two European-grade plants.

By the end of the 1980s, however, the company was caught between rising production costs on the one hand and fixed European sugar prices on the other, making it unable to compete effectively against its far larger adversaries. Instead, Bourbon decided to diversify into other industries, starting with a move into the professional fishing market in 1989 and the development of operations involving lobster fishing and line fishing for larger fish species.

The company remained focused on its Réunion Island home for its next venture as well, when it acquired its first retail operation on the island in 1991. Over the next decade, the group developed into Réunion's leading supermarket group, acquiring the franchises for the Cora and Score retail formats. By the end of the 1990s, Groupe Bourbon had opened four Cora shopping malls and 15 Score supermarkets across the island. In support of its retail growth, the group also began developing a food production component, producing a variety of foods, including dairy foods starting in 1992, for sale in its retail network.

Maritime Specialist for the New Century

International expansion, however, held increasing interest for Groupe Bourbon in the 1990s. In 1994, the company made its first venture into the International retail market, opening a Cora hypermarket in Madagascar. The company followed that successful expansion with the opening of a supermarket in Vietnam in 1995. By the end of the decade, Bourbon's retail empire had extended into Mayotte, also known as the Comoro Islands, and in 2001 the group became the leading retailer on the island of Mauritius as well. By then, the company's diversified activities overshadowed its historic sugar refining operation, and in 2001 the group sold off its last sugar refinery.

Instead, Bourbon's attention had been captured by a much different activity: maritime services. Bourbon's introduction to that market came in the early 1990s, when the group's auditor had alerted de Chateauavieux that another customer, family-controlled Compagnie Chambon, was looking for a new shareholder. Chambon had been providing towing and other port services for the port of Marseilles since 1873, adding offshore rescue and salvage services in the 1930s, and had grown largely through absorbing other Marseilles-based tugboat companies and thereby becoming one of the port's two main operators. In 1971, Chambon formed a partnership, Société de Remorquage Portuaire et d'Assistance en Méditerranée (SRPAM), with its chief rival, Société Provençale de Remorquage, founded in 1899.

Bourbon bought a majority stake in Chambon in 1992. The purchase represented the group's first venture into the mainland French market. If Bourbon's entry into maritime services had come somewhat by chance, de Chateauavieux quickly recognized the potential for growth in its new market. In addition to its Marseilles-based port activities, Chambon had also developed a small operation in West Africa, providing personnel transport and other support services for the Elf petroleum group's offshore oil platforms there. Chambon had built up a small fleet of so-called high-speed "surfer" craft, as well as supply vessels. However, as Elf prepared to venture into the deeper offshore waters, it required a new class of support vessel. Bourbon quickly met the challenge, adding three new 1,400 gt supply vessels to its fleet that were capable of providing deep-water support to the new Elf platforms.

The move gave Bourbon good early experience in the new and fast-growing deepwater offshore market, and over the next decade the company added eight more large-scale supply ships. As de Chateauavieux explained in Europe Intelligence Wire: "The competition is still fragmented. Everyone thinks they can become a deep offshore major but not everyone has taken the measure of what needs to be done to do this." Bourbon's early move into the market not only gave it the experience, it also led it to target the sector as one of its core growth areas for the new century.

Key Dates:

1948:: Several Réunion Island sugar cane producers merge to form Sucrerie de Bourbon.
1978:: Jacques de Chateauvieux takes over as company head and begins restructuring, reducing the number of sugar refineries.
1989:: Bourbon decides to diversify, acquiring professional fishing operations.
1991:: Bourbon diversifies into retail distribution, acquiring its first supermarket in Réunion.
1992:: The company enters the maritime services market by acquiring a controlling stake in Marseilles-based Compagnie Chambon; Bourbon also begins food production operations.
1994:: The company begins developing international retail operations with the opening of its first store in Madagascar.
1996:: Groupe Bourbon acquires French port towing and services leader Les Abeilles, which absorbs Chambon, then acquires Sociéte de Provençale; Bourbon acquires dry bulk transport specialist Setaf-Saget.
1998:: Groupe Bourbon goes public with a listing on Euro-next Paris Stock Exchange's secondary market.
2000:: Bourbon decides to refocus on retailing and maritime services, selling off its food production businesses.
2001:: Restructuring of the company continues with the sale of its last remaining sugar refinery, the acquisition of 50 percent of Brazilian deepwater offshore specialists Delba Maritime, and a move to exit retail distribution by 2007.
2002:: The company enters the Gulf of Mexico market with an agreement to supply ten offshore support vessels to its partner Rigdon Marine.

In the meantime, Bourbon continued to build up its Maritime Division. In 1996, the company took a major step forward into its transformation to a shipping group when it acquired France's Les Abeilles. That company had originated in the northern port of Le Havre in 1864, and, through a series of acquisitions, including Union des Remorqueurs de l'Ocean and Progremar, had grown into one of France's leading port tugboat and towing services provider. Following its takeover by Bourbon, Abeilles absorbed the operations of Compagnie Chambon, then acquired SRPAM partner Société Provençale.

The new Abeilles now became France's leading towing and port services operator. At the same time, Bourbon spun off its international and deepwater offshore services operations into a new subsidiary, Les Abeilles International, and was busy integrating another new shipping acquisition, that of Setaf-Saget. Founded in 1968, Setaf-Saget represented yet another new shipping market for Groupe Bourbon, that of the dry bulk transport market.

Bourbon went public in 1998, listing on the Euronext Paris Stock Exchange's secondary market. By 2000, Bourbon's shipping revenues were growing rapidly and already represented one-third of the group's total annual sales of more than EUR 1.1 billion. In that year, however, the company undertook a strategic review with an eye toward boosting value for its shareholders, who included, in addition to the de Chateauavieux family, some 200 other Réunion-based shareholders. As a result of that review, the company decided to refocus around a dual core of retail distribution and maritime services.

By the end of 2000, the company had already sold of its dairy foods unit, with plans to dispose of the rest of that division soon after. Also to go was the group's last remaining sugar refinery, sold in 2001. Then, at the end of that year, Bourbon signaled the start of the next phase of its restructuring—an exit from the retail sector. That process was begun with the sale of a one-third stake in Vindémia to French retail giant Casino. Although Bourbon remained in control of its retail operations, and continued to expand the division not only within Réunion but internationally as well, the agreement with Casino gave Bourbon the right to exercise an option whereby Casino would acquire all of Vindémia. That step was expected to come as early as 2007.

With the sell-off of the retail group, Bourbon expected to become a pure-play shipping group. As part of its effort to take a place among the majors in the maritime services market, especially in the fast-growing deepwater sector, Bourbon acquired a 50 percent stake in Brazilian deepwater specialist Delba Maritime, expanding the company's operations into South America. That purchase also brought the company closer to the lucrative Gulf of Mexico market. In 2002, the group formed a partnership with Rigdon Marine, with Bourbon agreeing to build ten oil platform supply ships for use by Rigdon Marine in the Gulf. The company expected the first delivery phase to be completed by 2004 and the entire delivery to be fulfilled in 2005.

Groupe Bourbon continued to look for opportunities for expansion in the international maritime market. In 2002, the group took control of Norway's Island Offshore II, with a 51 percent stake. The company then acquired 25 percent (later boosted to 39 percent) of fellow Island Offshore shareholder Havilas Supply. In 2003, the group reached a further agreement with one of Havilas's institutional shareholders to acquire majority control of Havilas by 2006, thereby boosting its control of Island Offshore itself. These deals were initially meant to give Bourbon an entrance into the offshore market in the Nordic region; yet the acquisition of Island Offshore also strengthened the group's operations in the booming West African offshore market.

The refocused Bourbon group now boasted revenues of EUR 940 million, with its shipping operations accounting for 38 percent of those sales. While France (Réunion Island is considered a part of France) remained the company's core market, international operations had already reached 39 percent of the group's total sales. Bourbon continued to seek new maritime expansion activities as it set sail for a leading position in the fast-growing offshore services market.

Principal Subsidiaries

Antilles Trans; Armement Sapmer Distribution; Bourbon Brazil Participacoes; Bourbon Maritime; Chambon Offshore International; Compagnie Financière De Bourbon; Island Offshore A S (Norway); Les Abeilles International SA; Les Abeilles SA; Sapmer; Setaf Saget SA; Sonasurf (Angola); Surf SA.

Principal Competitors

Exel PLC; Kawasaki Kisen Kaisha Ltd.; Alghanim Industries; Wagenborg Shipping B.V.; Serco Group PLC; HAL Investments B.V.; Royal Boskalis Westminster N.V.; Arkhangelsk Seaport Joint Stock Co.; International Marine Services.