Hagemeyer N.V.

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Hagemeyer N.V.

Rijksweg 69
1411 GE Naarden
The Netherlands
Telephone: ( + 31) 35-695-76-11
Fax: ( + 31)35-694-43-96
Web site: http://www.hagemeyer.nl

Public Company
Incorporated: 1904
Employees: 18,841
Sales: EUR 6.41 billion ($6.45 billion) (1999)
Stock Exchanges: Euronext Amsterdam
Ticker Symbol: HGM
NAIC: 421620 Electrical Appliance, Television, and Radio Set Wholesalers

Hagemeyer N.V., inheritor of the great Dutch trading houses of the 19th century, is reinventing itself for the 21st century. The company, which operates as a holding company for a vast array of subsidiaries located all over the world, is shedding its consumer products distribution wing to concentrate around a new core of business-to-business products and services. Consumer products accounted for approximately one-fourth of Hagemeyer’s revenues at the end of the century. Among the businesses sold off by the company at the turn of the century were Freetime Group’s consumer angling division, the largest supplier of fishing equipment and related products in Europe; Case Logic, a leading marketer of cases for personal stereo and compact discs; Polly Logic, a maker of business gifts and related products; and Hagemeyer’s two-thirds ownership of car rental agent Avis, which Hagemeyer sold to Avis Europe in January 2000. The company also is exiting the information technology distribution market. In November 2000, the company announced its plan to sell off its fast-growing Tech Pacific subsidiary, which is a leading supplier of computer hardware products to the Pacific Rim and Asian markets. The company also merged its Codis computer hardware distribution operations into a joint venture with Getronics NV. A steady diet of acquisitions will nonetheless assure continued growth to Hagemeyer’s revenues. At the end of 2000, the company announced its acquisition of Almacenes de Baja y Media (ABM), the Spanish market’s leading electrical distributor. Part of the company’s decision to reorient its operations stem from the collapse of its South American retail subsidiary Ceteco, which foundered on the region’s late 1990s economic crisis. Yet Hagemeyer has a long tradition of reinventing itself and adapting to current business realities. The company has been led by Rob Ter Haar since 1999. Hagemeyer trades on the Euronext Amsterdam stock exchange.

A Modern Trading House at the Turn of the Century

The Golden Era of Dutch trading was already some centuries past at the end of the 19th century, particularly as the British merchant houses gained control of the world’s shipping lanes and dominated colonial trade. Yet the Dutch trading houses remained a strong force in world trade, especially between The Netherlands and its own colonies. Changing market conditions, however, were forcing a number of trading houses to exit such principal markets as the Dutch East Indies (Indonesia), leaving the field open for newcomers more willing and able to adapt to modern trade arrangements.

These newcomers included brothers Anton and Johan Hagemeijer (the “ij” was pronounced roughly like a “y”). Sons of an Amsterdam watchmaker, the Hagemeijer brothers traveled to Surabaya, in Indonesia, in the 1890s, beginning careers as bookkeepers in the colonial offices of other trading houses. Their career as independent traders began at the turn of the century, when Anton Hagemeijer, then 26 years old, traveled back to The Netherlands to marry. During his stay in The Netherlands, Hagemeijer agreed to receive a consignment of 24 cheeses from Alfensche Kaashandel, a cheese merchant located in Hagemeijer’s wife’s village of Alphen aan den Rijn, to be sold on commission. The consignment arrived in February of 1901 and sold at a profit. By March of that same year, with the arrival of a new consignment of cheeses, Hagemeijer was no longer working on commission, but in a joint venture with Alfensche Kaashandel.

Anton soon was joined by elder brother Johan in the growing new trading venture. By September of that year, Hagemeijer’s ledgers recorded not only sales of cheeses, but a variety of other products, such as cigars, kapok, and even china—finding ready customers among the colony’s luxury-starved European settlers. The Hagemeijer brothers soon quit their bookkeeper jobs to devote themselves full-time to their expanding business. By 1903, the business had grown to include a long list of items sailing to Indonesia from The Netherlands, including clocks, traveling bags, fabrics, ink, and wine, as well as continued imports of cheeses. Whereas the cheese imports remained a joint venture, the rest of the Hagemeijers’trade was entirely at their own risk. By then, however, the company already was booking some 60,000 guilders in revenues—a figure that doubled a year later.

The Hagemeijer brothers formally joined in business in 1904, establishing Hagemeijer & Co. in Surabaya. Soon after creating the business, Anton returned to Amsterdam to oversee the new company’s growing purchasing operations, which were most likely handled by the brothers’ father until then. A feature of the company was its willingness to trade in branded goods—a niche left untouched, for the most part, by its more established competitors. Hagemeijer not only acted as a distributor for well-known brand items, it also developed its own brands for its Indonesian market for a range of bulk goods. By the end of the first decade of the new century, Hagemeijer & Co.’s sales had topped NFI 1 million.

At the outbreak of the First World War, Hagemeijer’s sales already had doubled, topping NFI 2 million, with profits of some NFl 200,000. The company’s concentration on importing and wholesaling activities, and its focus on Indonesia, left it mostly untroubled during the war. Indeed, the company, which had entered the war with a capital of NFl 800,000, emerged from the war years with a capital that had more than quadrupled. The Netherlands’ neutral position during the war enabled the company to continue operating from its main Amsterdam purchasing office, but also to open new purchasing agents, such as in Manchester, England, and extend its Indonesian distribution operations by opening a new branch in Medan.

The company lost one of its founders when Johan Hagemeijer died in October 1918. At that time, the company was reincorporated as a limited liability company, with shares divided equally between Anton Hagemeijer and his brother’s widow. At the same time, the company adopted a new spelling for its name—Hagemeyer—because the “ij” character was not always available on typewriters of the day. The company’s main East Indies operation was by then transferred to Batavia.

Recovering from Crisis in the 1920s

If Hagemeyer had prospered during the war, it was quickly caught up in its aftermath. The disruption of large parts of international trade had caused large-scale warehousing of merchandise and commodity items. The end of the war re-opened international trade. The market was now flooded with items, resulting in a vast price collapse that wiped out many of Hagemeyer’s competitors, including a number of The Netherlands’ oldest trading houses. Hagemeyer’s own low levels of stock helped protect it from the worst of the market collapse. Yet it soon was forced to close a number of its branch offices and by 1921 the company’s losses nonetheless mounted to some NFl 500,000. After posting losses again the following year, all of the company’s shares were taken over by its creditor bank, a move that enabled Hagemeyer to remain in business and under Anton Hagemeijer’s leadership. Control of the company later was transferred back to the Hagemeijer family, as the market quickly recovered in the early 1920s.

The company now sought to protect itself by restricting its activity almost entirely to shipments based on firm client orders, instead of allowing the company’s far-flung buying agents to make purchases from the company’s own funds. The company’s growing presence in the relatively small Indonesian markets gave it a new boost in a rapidly changing market. Manufacturers increasingly granted market monopolies to distributors, giving trading houses such as Hagemeyer exclusive importing rights to a particular market. Hagemeyer successfully gained a strong list of clients and product markets for its Indonesian base, including Procter & Gamble, the Camel cigarette concession of Reynolds, Burroughs Wellcome & Co. beauty products, Willem II cigars, and Lijempf dairy products.

Hagemeyer, like most of the world’s international trading houses, was hard hit by the Great Depression, which also had as a result a growing number of import and export restrictions. Nonetheless, by the late 1930s, the rebuilding of much of the world economic scene gave the company hope for renewed growth. To capitalize on the potential for expansion, Hagemeyer went public in 1937, listing on the Amsterdam stock exchange. Yet, just three years later, the company faced a new crisis, as The Netherlands was invaded by the German army.

Company Perspectives:

Hagemeyer N.V. is committed to creating value for shareholders. The primary focus of the Group’s financial performance will be improvement in economic value generated, as measured by the excess of net operating profit after tax less a charge for the capital invested in the Group. To achieve this, the Group’s strategy will target the following: manage the Group on a more focused basis thereby creating critical mass and opportunities for synergies and improved returns on the capital already invested in the businesses; allocate capital to acquisitions and investments which support the more focused strategy and lead to an improvement in economic value; withdraw from businesses which fit better with a third party and reinvest the proceeds in core businesses to create economic value; manage the Group’s finances and capital structure to minimise the cost of capital whilst maintaining a strong balance sheet.

The German takeover of The Netherlands sealed off the company’s Netherlands operations from its main Indonesian branch. Shortly after the takeover, the Amsterdam branch had succeeded in building up a large stock; it was with this stock that the company’s Netherlands’ office managed to survive the war, even turning a small profit, while carefully avoiding collaborating with the Nazi occupier. Company founder Anton Hagemeijer, however, had been less careful. Hagemeijer had been in Manchester, England during the invasion of The Netherlands and, therefore, found himself classified as a German enemy. Meanwhile, the Dutch government in exile discovered that Hagemeijer had been a major donor to the NSB, the Dutch Nazi party. Leadership of the company’s Indonesian operations was placed under Hagemeyer’s Batavia office, while Anton Hagemeijer fled to the United States.

The Japanese invasion of Indonesia put an end to Hagemeyer’s activity in 1942. The Japanese capitulation in 1945 only brought a brief moment of renewed hope for the company, as nationalists proclaimed the republic of Indonesia, sparking a bitter four-year war ultimately lost by The Netherlands. Sensing that trade opportunities were to become extremely limited in the new Indonesian state, Hagemeyer already had begun to take steps to shift the focus of its operations. In 1950, the company was granted a one-year import and export monopoly for The Netherlands’ New Guinea colony. Hagemeyer also began to develop operations in Singapore as well. By 1956, Hagemeyer decided that its New Guinea and Singapore operations were profitable enough for the company to exit the increasingly restrictive Indonesian market. An attempt to sell the company fell through, however, in that year.

Nonetheless, the company’s expansion moves helped protect it when all Dutch companies operating in Indonesia were placed under Indonesian government control. Hagemeyer’s position as a pure trading house helped buffer the company’s losses; meanwhile, it stepped up its international expansion, targeting other Asian markets, but also looking toward the African continent. Hagemeyer had opened its first agent office in Congo in 1952; in 1958, the company acquired Handelmaatschappij v/h JF Sick & Co., giving it operations in Ghana, Nigeria, and Cameroon as well. In 1957, the company had turned also to the Dutch colony of Surinam, hoping to enter the South American market.

Transforming for a New Century

By the 1960s, Hagemeyer faced a new market reality—the growth of the jet airplane industry enabled manufacturers to come into closer contact with their customers, eliminating much of the market for the world’s trading houses. Political unrest, as much of the world’s colonies clamored for independence, led Hagemeyer to refocus its activities on its European home. By the early 1970s, some 70 percent of the company’s activity came from Europe, compared with just 21 percent at the start of the 1960s. Where Hagemeyer had formerly imported European goods to Asia, it now began importing Asian goods, and especially Japanese products, into Europe. Among the company’s important customers was the Matsushita group, which manufactured under such brand names as Panasonic.

Yet manufacturers increasingly moved to take over their own marketing and distribution activities in the 1970s. This climate led Hagemeyer into transforming itself from a pure import-export concern to a diversified manufacturer, a move the company began in 1965 with the acquisition of leather goods maker Amsterdamse Leder Maatschappij. This was to prove the first of a long series of acquisitions, including the 1969 acquisition of Indola, a diversified maker of cosmetics and pharmaceuticals, as well as electrical appliances. The company’s manufacturing operations quickly proved disastrous, however. By the mid-1970s, the company, which continued in its struggle to achieve profitability with its manufacturing wing, gave up on new acquisitions. The deepening recession at the beginning of the 1980s brought new woes for the company, which slipped into losses. Rescue came, ironically, from Indonesian giant First Pacific, which gained majority control of Hagemeyer in 1982.

The arrival of Andrew Land as CEO and chairman helped Hagemeyer reestablish itself on the world scene. Land steered the company from a modestly sized, overly diversified and struggling company of just NFl 700 million in 1985 to a focused holding company posting more than NFl 12 billion by the end of the century. Land led Hagemeyer into building up a successful specialty foods importing arm in the United States, starting in 1988. The following year, the company acquired JW Bernard & Zn., bringing it into the wholesale electrotechnical business—which was to grow to become one of the company’s primary businesses by the late 1990s.

The company, which existed primarily as a small head office guiding a growing empire of more or less independently operating subsidiaries, focused on building itself through acquisition, while being careful to buy only companies with profitable operations. Not all of the companies’ acquisitions were successful, however, such as its purchase of Allwave, meant to mark an entry into retailing in 1989; the company sold off the Allwave chain of stores in 1992.

Key Dates:

1900:: Anton and Johan Hagemeijer begin importing activities.
1904:: Business incorporates as Hagemeijer & Co.
1918:: Company reincorporates as limited liability company Hagemeyer & Co.
1921:: Bank takes over company’s shares.
1937:: Hagemeyer is listed on Amsterdam stock exchange.
1950:: Operations in New Guinea are established.
1952:: An office in the Congo is opened.
1958:: Hagemeyer acquires Handelmaatschappij v/h JF Sick & Co.
1965:: Company acquires Amsterdamse Leder Maatschappij.
1969:: Company acquires Indola.
1982:: First Pacific acquires majority shareholding.
1988:: Company enters U.S. specialty foods distribution market.
1995:: Company acquires Borumij Wehry.
2000:: Company acquires Almacenes de Baja y Media.

In 1995, Hagemeyer reached an agreement to acquire Borsumij Wehry, one of the oldest and formerly largest of The Netherlands’trading houses. The acquisition gave Hagemeyer the Ceteco South American retail operation, giving the company a stake in that continent for the first time. At the same time, Hagemeyer began to look into entering the fast-growing Asian computer market, acquiring computer hardware distributor Tech Pacific in 1997. The following year, as that market sank into economic turmoil, First Pacific sold off its 40 percent holding in Hagemeyer.

The extension of the Asian crisis into the Latin American market brought Hagemeyer its own headaches, as the company’s Ceteco retail subsidiary, which operated extensive credit operations, found itself hit not only by the economic crisis but also by a series of natural disasters. Ceteco finally was forced to declare bankruptcy, bringing Hagemeyer its first losses in some 15 years.

The Ceteco collapse and the retirement of Andrew Land provided the moment for a new transformation for the company. Joining Hagemeyer now was Rob Ter Haar, who was given a mandate to revise the company’s strategy. Ter Haar immediately announced the company’s decision to sell off its consumer goods distribution operations and instead concentrate around a new core of business-to-business services. As part of its new orientation, the company also shed much of its only recently acquired computer businesses, including most of Tech Pacific in 1999. Instead, the company has increased its focus on business-to-business distribution, especially its strong electrotechnical wing. That operation was strengthened at the end of 2000 with the acquisition of Almacenes de Baja y Media, the Spanish market’s leading distributor of electrical products. The transformed Hagemeyer, celebrating its 100th anniversary, looked forward to carrying on its trading house Heritage through the new century.

Principal Subsidiaries

Elektroskandia AB (Sweden); Elektroskandia AS (Norway); Elektroskandia Oy (Finland); Elektroskandia Ltd. (Russia); Elektroskandia AS (Estonia); Elektroskandia SIA (Latvia); UAB Elektroskandia (Lithuania); Elektroskandia Logistics (Shanghai) Co. Ltd. (People’s Republic of China); Elektro Technischer Großhandel ETG J. Fröschl & Co. GmbH & Co. KG (Germany; 83.4%); Brück Elektrofachgroßhandel GmbH & Co. KG (Germany; 83.4%); Heberlein & Probst Elektro-Großhandlung GmbH & Co. (Germany; 83.4%); Heberlein & Probst GmbH & Co. (Germany); J.Fröschl & Co. Prag S.R.O. (Czech Republic; 83.4%); Newey & Eyre Ltd. (U.K.); Dunlop & Hamilton (U.K.); Newey & Eyre Specialist Cables (U.K.); Newey & Eyre Data Networking (U.K.); Nationwide Lamps (U.K.); Ross Electrical (U.K.); Lerwick Engineering Supplies & Services (U.K.); BLM Electrical Supplies (U.K.); A&A Security Technologies Ltd. (U.K.); Barron Control Group Limited (U.K.); Newey & Eyre (C.I.) Ltd. (Guernsey); Newey & Eyre (Jersey) Ltd.; Eastern Electrical (Republic of Ireland); Bernard B.V.; Cable Support B.V.; Schweitzer Elektrogrosshandel GmbH (Austria); ELIN Elektrohandel GmbH (Austria); Winterhalter + Fenner AG (Switzerland); ElectroLAN SA (Switzerland); Tristate Electrical & Electronics Supply Company, Inc. (U.S.); Vallen Corporation (U.S.); Encon Safety Products, Inc. (U.S.); Vallen Safety Supply Company (U.S.A.); Lion-Vallen L.P. (U.S.; 50%); Century Sales & Services, Ltd. (Canada; 50%); Vallen Safety Supply Company, Ltd. (Canada; 62%); Proveedora de Seguridad Industrial del Golfo, S.A. de C.V. (Mexico; 90%); Vallen-Acetogen Safety Chile S.A. (Chile; 50%); Gen-Weld Safety Equipment Company Limited (Ireland); Stokvis Tapes en Lijmen B.V.; Peco Tapes B.V.; Qualitape N.V. (Belgium); Stokvis Danmark A/S (Denmark); Stokvis Finland Oy, Nummela; Stokvis Valorem S.A. (France); Stokvis Technische Klebebänder GmbH (Germany); Stokvis Tapes (U.K.) Ltd.; Norway Stokvis Tapes Norge AS; Sweden Garco AB; Van Wijk & Boerma Pompen B.V.; Van Wijk & Boerma Firepacks B.V.; Wynmalen & Hausmann B.V.; Pelle Services B.V.; Nemaasko B.V.; Diko Trading B.V.; Bouwmachines Hoogerheide B.V.

Principal Competitors

Anixter International Inc.; Consolidated Electrical Distributors Inc.; Graybar Electric Company, Inc.; Hughes Supply, Inc.; Legrand SA (France); Pameco Corporation; Premier Farnell plc; Thomas & Betts Corporation; Tyco International Ltd; WESCO International, Inc.; Wolseley plc.