EuroBusiness Media (EBM): Wendel, one of Europe’s leading investment firms, is holding its annual Investor Day. Frédéric Lemoine, welcome. You are the Chairman of the Executive Board of Wendel, let’s begin with your latest announcement which surprised the market positively: you intend to sell Deutch to TE Connectivity, and your shares jumped up 16% on the day of the news. The transaction will be finalized in the first half of next year. What was the rationale for the deal?
Frédéric Lemoine: TE Connectivity approached us quite recently with a very interesting offer from an industrial point of view and there lies the rationale for the deal. Clearly we had with Deutch a very impressive company which is the world leader for connectors in harsh environments. And TE Connectivity, like other players in this sector, knows Deutch pretty well and it has shown us that the combination of the two companies creates a world leader in connectors which offers a very promising outlook for Deutch, for its R&D and for its employees.
EBM: We can see the rationale of this deal for Deutsch, but what’s the positive outcome for Wendel?
Frédéric Lemoine: For Wendel, the sale of Deutch, when the closing will be done, will bring a lot of cash, nearly €1 billion of cash, and after a very significant capital gain of €575 million. So it’s an investment that will have been multiplied by 2.4 times since we bought Deutch in June 2006. So it’s quite an impressive result, I believe.
EBM: As the year draws to a close, what are the key takeaways from 2011 for Wendel?
Frédéric Lemoine: 2011 has been a strange year, a very booming year in the first 7 months. And then, following the market crisis at the beginning of August, the environment has been changing quite significantly. And throughout the whole year we have been supporting our companies that have done well, including in the second part of the year, and that have continued to work towards their mid-term objectives. So it has been very positive: we sold several times shares of Legrand and we created significant capital gains. And with the money we received, we have continued the reimbursement of our debt, for €1.5 billion over the year. And we have reinvested in three new companies: Mecatherm, Parcours and exceet, which are non listed companies that will be very nice to have in the long term.
EBM: S&P recently downgraded its outlook on your credit rating. Is the issue of your debt still an issue where there’s much left to be done? Does it have an impact on your investments and financing?
Frédéric Lemoine: Since 2009 we have reduced our debt very, very significantly by nearly €3.7 billion, so I believe our financial structure is now appropriate for the long term. We will continue to monitor our financial structure and to repay debt earlier than expected. However, S&P plays its role, as clearly they compare our debt with our assets. And since the market direction changed at the beginning of August, clearly S&P had to cancel the upgrade they had done last July.
EBM: What are your outlook and priorities for next year, in a context of continued uncertainty in the financial markets?
Frédéric Lemoine: For 2012 I believe our duty is to remain very cautious. In the Board of Directors of all our companies, where we play an active role, we insist on the risks of the environment. We must not freeze the activities, of course, but we are very cautious for new investments, new developments, because the economic climate might change significantly. However, in the future we believe that we have a lot to expect from our participations, so it’s a mixed feeling that we are at the same time ambitious and cautious.
EBM: With the additional cash from the Deutsch disposal, how to you see your portfolio evolving in the medium to long term?
Frédéric Lemoine: The cash we will receive from the sale of Deutch will increase significantly the cash we already have to nearly €2 billion. So it’s a lot of margin for manoeuvre for the future: both to repay debt and to strengthen further our financial structure, but also for new investments, for new investments that can be of a bigger size – I would say from €200 to €500 million – in order to create a diversified portfolio of around ten companies, mostly unlisted, that will create value for our shareholders.
EBM: And finally, in the context of your Investor Day, is there a message that you would like to address to your shareholders who are continuing to experience much turbulence in the stock markets?
Frédéric Lemoine: Yes, I understand that our shareholders must have been quite disappointed by the evolution of our share price since the beginning of August. Clearly, the stock markets have experienced a lot of volatility and our share price clearly showed that. However, what is more important to me and, I believe, should be important for our shareholders, is to know that our assets are of very good quality, that they have some hidden value in them, like the sale of Deutch clearly shows, and that we still have some leverage effect on our balance sheet which will increase our share price more rapidly than the share price of our listed companies. So we have a very positive outlook in front of us, some means to reinvest, to create value for the long term, and I believe the coming years will be positive for our shareholders, at least that’s what we are committed to do.
EBM: Frédéric Lemoine, Chairman of the Executive Board of Wendel, thank you.
Frédéric Lemoine: Thanks to you.
Paris, December 2, 2011 — Wendel, one of Europe’s leading investment firms, holds its annual Investor Day. Frédéric Lemoine, Chairman of the Executive Board of Wendel, comments on his key takeaways from 2011 and his outlook for 2012.
Company website: www.wendelgroup.com