Compagnie Nationale à Portefeuille

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Compagnie Nationale à Portefeuille

Rue de la Blanche Borne 12
Loverval, B-6280
Belgium
Telephone: (32 071) 60 60 60
Fax: (32 071) 60 60 70
Web site: http://www.npm-cnp.be

Public Company
Incorporated: 1906
Employees: 30
Total Assets: EUR 4.9 billion ($6 billion) (2006)
Stock Exchanges: Brussels
Ticker Symbol: CNP
NAIC: 525910 Open-End Investment Funds; 551112 Offices of Other Holding Companies

Compagnie Nationale à Portefeuille (CNP) is one of two publicly listed investment vehicles—the other is Groupe Bruxelles Lambert (GBL)—for the assets controlled by Belgian financier Baron Albert Frère and family. CNP maintains a highly active investment portfolio, generally seeking a controlling interest, whether as majority shareholder or in partnership with other investors, in its investment targets. In this way, the company participates actively in the strategy, management, direction and performance of the companies in its portfolio. While the company positions itself as an investor—as opposed to a corporate raider—it nonetheless maintains a high degree of fluidity in its investments, most of which can be considered short term. The company is also willing to venture into riskier investments than GBL, which itself is partly controlled by CNP. Both investment vehicles have played an active role in Frère's determination to "Europeanize" the capital structure of Europe's industries, and Frère has played a leading role in merging companies and assets in order to transcend national boundaries. Nonetheless, CNP's holdings focus especially on the Belgian and French markets. CNP's ongoing assets include stakes in oil giant Total S.A., steel group Imery, Suez, the Transcor oil and national gas distribution group, French construction leader Eiffage, the cheese leader Eiffage, and restaurant operators including Quick and Groupe Flo. Altogether, CNP's assets topped EUR 4.9 billion ($6 billion) in 2006, producing net profits of more than EUR 323 million ($500 million).

CNP is listed on the Euronext Brussels stock exchange, and is led by Albert Frère's son Gerard Frère. While founded in 1906, CNP was acquired by Frère only in 1987. The Frère family directly controls 18.9 percent of CNP through its Frère-Bourgois holding (the family's original company). Frère-Bourgois in turn has a 53 percent stake in Erbe, in partnership with BNP Paribas, which controls 45.2 percent of CNP. The company is also known under its Flemish name, Nationale Portefeuille Maatschappij (NPM).

BUILDING A BELGIAN STEEL EMPIRE

The Compagnie Nationale à Portefeuille (CNP) was founded in 1906 under the name "Le Gaz Riche" as one of many investors in the development of gas-based lighting systems in Belgium. By 1909, the company had changed its name to Compagnie Nationale d'Eclairage (or National Lighting Company). It was only in 1972 that the company adopted the name of Compagnie Nationale à Portefeuille (CNP), also known under its Flemish name, Nationale Portefeuille Maatschappij (NPM). As the change in name suggests, by then the company had become a holding vehicle for various financial investments. Purchased by Albert Frère in 1987, CNP became one of Frère's main investment vehicles.

Frère himself had by then established himself as one of Belgium's most enigmatic and powerful financiers. Frère was born in 1926 in Fontaine-l'Evèque, outside of Charleroi, then at the heart of Belgium's steel industry. Frère's father Oscar Frère operated a small company producing nails, chains and other objects based on the region's steel and iron output. Much of the company's production was performed by homeworkers, who came to the factory to pick up the scrap iron, and to deliver the finished goods.

Frère's father died when he was only four, and his mother, Madelaine Bourgeois, took over the factory's operations, which the became known as Frère-Bourgeois. Legends were to develop describing Frère's ascension as a rags-to-riches story, depicting Frère as pushing about carts full of nails—in fact, the family was relatively well-off, and Frère was able to attend university, studying for a degree in the Humanities. During the Second World War, Frère discovered the world of business, selling oil to the military stationed in the Charleroi region. In 1944, Frère left school, joined his mother at Frère-Bourgeois. There, Frère became responsible for buying scrap iron from the region's steelmakers and selling the company's finished products.

While the company originally supplied the home market, Frère quickly recognized the potential for exporting the region's steel output to other markets. Frère set himself up in this area in 1950 in time to benefit from the surge in demand for steel brought on by the Korean War. For this, Frère bought his first company, Erbe, a small furniture maker, which was to serve as an important vehicle for Frère's later acquisitions. Frère soon lined up financing to expand his export operation, hiring personnel and eventually becoming the principal intermediary for the region's steel exports. Next, Frère sought to guarantee his supply, and launched his first major deal, that of the purchase of a struggling steel company, Le Laminoir du Ruau, part of the Luxembourg-based Arbed steel group. Frère was then just 28 years old.

By the late 1960s, Frère had already owned much of the Charleroi region's steel industry. Frère's rise had brought him to the attention to Maurice Naessens, a representative of banking giant Paribas in Belgium. Naessens decided to form an alliance with Frère, and provided the backing for Frère's acquisition of the largest steel producer in the Charleroi region, Hainaut-Sambre. The purchase, made through Erbe, transformed Frère into Belgium's second largest steelmaker. Nonetheless, Frère-Bourgeois remained at the heart of Frère's business interests.

FROM INDUSTRIALIST TO FINANCIER

One of Belgium's most important industrialists, Frère began his shift toward his third career, that of financier, during the 1970s. By then, the Belgian steel industry was on the decline, and the Belgian government, in part to prevent a wave of layoffs, began nationalizing the country's steel operations. Frère once again proved to have impeccable timing, and began selling off his steel holdings, fetching premium prices ahead of the collapse of the industry in the early 1980s. Despite the massive losses in the steel industry, Frère himself continued to profit from the operations of Frère-Bourgeois, which held an essential role in the Belgian steel industry. This holding led to a great deal of controversy, and eventually Frère agreed to sell the Belgian government a 49 percent stake in Frère-Bourgeois for a small, largely symbolic fee, on the condition that the government give Frère-Bourgeois a 20-year exclusive contract. The deal served especially to consolidate the value of Frère-Bourgeois, placing Frère in a strong bargaining position when the Belgian government acquired Frère-Bourgeois's operations in 1983. Frère-Bourgeois itself, however, remained in Frère's possession and became the vehicle through which Frère transformed himself into one of Europe's most respected financiers.

COMPANY PERSPECTIVES

NPM/CNP's mission is to act as a family company. Its long-term aim is the balanced growth of the value of the assets that its shareholders have entrusted it and the dividend distributed to them, with a low-risk profile. This value creation results from the generation of a net operating profit (NOPAT) that is greater than the weighted average cost of the capital invested.

Frère had begun to prepare his transition from industrialist to financier at the start of the 1980s, forming a partnership with good friend Paul Desmarais, of Quebec's Power Corporation, and Paribas's Gérard Eskénazi in order to take over a Swiss shell company, Pargesa. That company then acquired control of Groupe Bruxelles Lambert (GBL). GBL was by then Belgium's second largest holding company, with assets ranging from the Royal Belge insurance group to television company CLT-RTL, financial companies including Drexel Burnham Lambert and BBL, and especially the Belgian energy giants Tractebel and Petrofina. Yet GBL had fallen into debt at the start of the 1980s, providing an opening for Frère and Pargesa.

Pargesa and GBL served a major part of Frère's investment interests and, notably, his interest in acquiring control of Petrofina. By the end of the decade, following the departure of Eskénazi, Frère and Desmarais became equal partners, with each holding 50 percent. GBL was particularly instrumental in Frère's determination to internationalize Europe's industrial base. Over the next two decade, Frère used his holdings in many of the continent's major companies to push through a series of large-scale mergers—as exemplified by the merger of Petrofina, controlled by Frère since 1990, with France's Total in 1998. Yet Frère's own investment interests went further than those of GBL, which focused especially on long-term investments in large-scale companies.

In 1987, therefore, Frère, through Frére-Bourgeois teamed up again with Paribas to take over Compagnie Nationale à Portefeuille (CNP). For this, Frère-Bourgeois directly acquired a stake of nearly 20 percent; majority control went to Erbe, which itself was split between Frère-Bourgeois (53 percent) and Paribas (47 percent). In this way, Frère himself retained control of CNP. Under the complex shareholding structure set up by Frère, CNP also became the vehicle for the majority of Frère's shares in GBL.

While both GBL and CNP shared similar corporate cultures, their investment strategies diverged significantly. CNP became especially a vehicle for Frère's most active investments, with a strategy of becoming a majority shareholder, or at least a minority shareholder in partnerships with control of its investments. The company also targeted smaller and more dynamic companies in a more diversified range of industries than GBL. Through CNP, Frère also took a more active role in the management of its assets, including making strategic decisions, appointing key management positions and the like. Finally, CNP provided a vehicle for Frère's shorter-term investment interests. CNP also provided Frère with a place to groom son Gèrard Frère, who became chairman of the company.

CNP included holdings in many of leading companies in Belgium, with strong interests in a number of the largest companies in France as well. Among CNP's holding were Société Générale de Belgique, Petrofina, Royale Belge, Compagnie Générale des Eaux, Transcor, Electrafina, Hemma, Editions Dupuis, Hélio Charleroi, and Artemis. Over the next decade, however, CNP continued to shuffle its portfolio, in part as part of Frère's desire to encourage the creation of a number of larger, cross-border European companies capable of competing on a global scale.

KEY DATES

1906:: Founding of "Le Gaz Riche" in Belgium.
1909:: Le Gaz Riche becomes Compagnie Nationale d'Eclairage.
1926:: Birth of Alfred Frère.
1944:: Frère joins mother at family scrap iron business, Frère-Bourgeois, near Charleroi, Belgium.
1950:: Frère acquires furniture company Erbe and transforms it into steel exporter, then begins acquiring steel companies in Charleroi region.
1968:: Backed by Paribas, Frère acquires Hainaut-Sambre, becoming leader of second largest steel company in Belgium.
1972:: Compagnie Nationale d'Eclairage becomes Compagnie Nationale à Portefeuille (CNP).
1983:: Frère sells steel holdings to Belgian government and takes over Groupe Bruxelles Lambert.
1987:: Frère acquires majority control of CNP, which becomes his primary investment vehicle.
1996:: The company sells Tractebel and gains 10 percent stake in Suez of France.
1999:: The company acquires Entremont cheese group in France.
2003:: CNP acquires Quick fast-food restaurant chain in France.
2005:: Groupe Flo restaurant group is acquired; company sells its 25 percent stake in Bertelsmann.
2006:: CNP completes six-for-one stock split.

Into the mid-1990s, CNP itself launched an effort to reposition its own portfolio from its focus on Belgium to a more European scale. As part of this strategy, the company began negotiating a series of mergers between its holdings in Belgium to larger partners in the Netherlands, France and elsewhere. Into the middle of the decade, the company transferred its majority control of Banque Bruxelles Lambert to ING Group, then Royal Belge to Axa. These sales also fit in with CNP's strategy to exit the banking sector in favor of a new focus on the media and energy markets, among others. The company's sale of its control of Tractebel for $1.6 billion enabled the company buy 10 percent of the powerful French conglomerate, Suez Lyonnais des Eaux in 1996.

One of the group's more spectacular successes was the merger of Belgium's Petrofina with France's Total in 1998. That merger gave Frère 9 percent of Total, placing him as the single largest shareholder in what was soon to become, following its subsequent merger with Elf—France's largest company. Another major deal came when Frère merged his television holdings in German, which also included leading Belgian television station RTL, with the Bertelsmann group, in a deal worth $9 billion. Frère then gained control of Luxembourg-based CLTUFA, the leading radio and television group in Europe.

NEW DEALS FOR THE NEW CENTURY

Into the mid-first decade of the 2000s, CNP's investment interests increasingly turned toward the restaurant and food sectors. In 1999, for example, the company bought a 46 percent stake in one of France's leading cheese producers, Entremont. In 2003, Frère formed a partnership with another Belgian investment group Ackermans & Van Haaren to gain control of France's Quick fast-food restaurant chain. Quick, positioned as the main rival to McDonald's had been struggling at the beginning of the decade. Under CNP's guidance, the chain quickly returned to health by mid-decade.

The Quick acquisition whetted the company's appetite for deeper penetration in the food sector. In 2005, the company, in partnership with another equity investment group, Tikehau Capital, bought Group Flo, the largest restaurant operator in France, for EUR 137 million. In the meantime, Frère was preparing his next big deal, selling his 25 percent stake in Germany's Bertelsmann Group to that company's controlling family shareholders, a deal that netted Frère nearly $6 billion.

Albert Frère—who was made a baron by Belgium's King Albert in 1994—celebrated his 80th birthday, and CNP's 100th anniversary by completing a six-for-one stock split in 2006. By then, Frère had become one of the leading forces behind the creation of a truly European financial and industrial market, and ranked among the world's wealthiest people. Although Frère's succession appeared secured with son Gérard at the helm of CNP, Frère himself showed no sign of slowing down. "I have," Frère told the New York Times, "simply erased the word retirement from my vocabulary."

M. L. Cohen

PRINCIPAL SUBSIDIARIES

Bss Investments; Carpar; Centre De Coordination De Charleroi; Compagnie Immobiliere De Roumont; Compagnie Nationale à Portefeuille; Erbe Finance (Luxembourg); Fibelpar; Finimpress; Groupe Distripar; Groupe Ijsboerke/Starco; Groupe Jean Dupuis; Groupe Transcor; Groupe Unifem/Entremont Alliance (France); Investor; Kermadec (Luxembourg); Newcor; Newtrans Trading; Pam (Netherlands); Swifin (Luxembourg); Swilux (Luxembourg).

PRINCIPAL COMPETITORS

ING Belgium N.V.; KBC Asset Management N.V.; Indufin; Fortis Investment Management S.A.; SIBEKA; Intervest Retail; Ibel N.V; Quest for Growth; Agridec S.A.; Dossche Invest N.V.; Electrorail N.V.; Almafin N.V.; Fin.Co; Beluga N.V.