Incorporated: 1925 as Pricel
Sales: FFr8.67 billion
Stock Exchanges: Paris
SICs: 2231 Broadwoven Fabric Mills—Wool; 2269 Finishing Plants, Not Elsewhere Classified; 3081 Unsupported Plastics Film & Sheet
Chargeurs International has a gift for redefining itself. Until 1996, the company combined its industrial activities—including world leadership positions in the wool and protective films industry, European leadership in automobile surface transportation, and a strong position in cruise lines with its Costa Crocière and other holdings—with a strong communications division, headed by its Pathé subsidiary, a leading film production and theater management concern, control of film and programming producer Renn Productions, as well as a controlling interest in the print daily Libération, strong participation in the French-based Canalsatellite satellite television service, and a 17 percent stake in Rupert Murdoch’s BSkyB satellite television network (itself worth some FFrlO billion per year). But in June 1996, Chargeurs, as it was then known, performed an American-style split-up—unheard of in France—spinning off its operations into two separate, publicly quoted companies: Chargeurs International and Pathé.
After divesting most of its Walon automobile transport subsidiary, and with preparations underway to sell off its Costa Crociére holding to Carnival Cruise Lines in 1997, Chargeurs International has refocused itself on two primary areas: wool and protective films. Chargeurs International holds the number one worldwide position in each of its wool segments: wool processing, wool-based fabrics, and wool interlining. The company is also the world leader in protective films—temporary, plastic adhesive shields used to protect the surface finish of materials such as stainless steel and plastics. Under chairman and chief executive officer Eduardo Malone, Chargeurs International has restructured itself back to profitability, posting a net income for 1996 of FFr136—compared to several years of losses leading toward the breakup. Longtime Chargeurs leaders Jerome Seydoux continues to function as Chargeurs International’s vice president, while taking charge of Pathé as chairman and CEO (backed by right-hand man Malone as vice president).
For Chargeurs, such a drastic change is nothing new: Until 1988 the company was more well-known in the transportation industry, with a historical presence in the shipping business under the name Chargeurs Réunis, and a controlling interest in UTA (Union des Transports Aériens), France’s second largest commercial airline. With the sale of both these businesses in 1988 and 1990, respectively, Chargeurs streamlined its portfolio dramatically, while establishing that its priorities for the 1990s would be the textile business and the relatively new field of media communications. The “international” character of the company is undeniable. With a presence on all five continents, more than 84 percent of Chargeurs International’s revenues comes from sources outside France.
The Seydoux Touch in the 1980s
Chargeurs S.A., as the company was known until 1989 when shareholders voted to change its name to Chargeurs, was the result of a merger in 1981 between the textile giant Pricel and the shipping company Chargeurs. Both concerns had illustrious histories in their respective fields, and both contributed to the culture of the new company.
Founded in 1925, Pricel quickly developed into one of the most powerful textile groups in France. The company’s success was built on chemical-based synthetic fabrics, primarily viscose, which provided a cheap if less durable alternative to natural fabrics. However, in 1961 Pricel, previously known as Celtex, transferred 80 percent of its holdings in synthetics to Rhône-Poulenc S.A., in exchange for five million Rhone-Poulenc shares. From that time Pricel operated as a holding rather than as an operating company, with a large number of industrial and financial operations in France and abroad. Important subsidiaries included textile company Gillet-Thaon and wool company Lainière de Picardie. Moreover, the viscose connection had not been completely severed and Pricel still had interests in concerns such as Spontex, Paris, and the Viscose Development Company of Great Britain. In addition, Pricel had owned some Chargeurs Réunis stock since 1974. However, in 1980 Pricel’s share in Chargeurs Réunis increased substantially, a move that foreshadowed the merger of the two companies.
Chargeurs Réunis, for its part, was founded in 1872 as a shipping company, which diversified early into the fledgling air industry in 1929. It expanded its interest in commercial airlines after World War II, with the creation of the Aeromaritime Transport Union (Union Aéromaritime de Transport), or UAT, which began a commercial service between Paris and Central Africa as early as 1949. The company was able to take advantage of France’s colonial connections to develop routes to out-of-the-way destinations, and under its new name UTA (Union des Transports Aériens), it eventually became France’s second largest airline after the national carrier Air France. Chargeurs Réunis also controlled a number of financial and real estate concerns that provided specialized services to the parent company. At the time of the merger, Chargeurs Réunis was a holding company whose important subsidiaries included, in addition to those mentioned above, Paquet Cruises Inc. of New York and Miami, and shipping freight companies such as the Nouvelle Compagnie de Paquebots.
According to contemporary press reports, the man who orchestrated the merger of Pricel and Chargeurs Réunis was Jérome Seydoux, chairman of Pricel. Developments after the merger would seem to bear this out; indeed, Seydoux is credited with most of the strategic decisions that changed the structure and character of Chargeurs in the late 1980s. Seydoux came to Pricel from oil and engineering giant Schlumberger, where he had served for many years. Seydoux, grandson of Marcel Schlumberger, eventually inherited that company’s leadership—a position he held for only 18 weeks before leaving to take over Pricel. The experience at Schlumberger was credited with giving him the taste for restructuring that he exercised to great effect at Chargeurs.
The merger between Chargeurs and Pricel took place in 1981 and Seydoux was subsequently appointed president and chief executive officer. Although the new company retained the name Chargeurs, the merger was in effect an absorption by Pricel of the former Chargeurs Réunis, and the latter was certainly more affected by the restructuring effort.
From the outset, Seydoux made it clear that the shipping and land transport sectors of the business caused him most concern. For a number of years revenue in these areas had been lackluster, due largely to an imbalance between supply and demand. Too many freight vessels were simply chasing too much cargo. Seydoux responded by overhauling a number of vessels in the company’s flagship operation CMCR (Compagnie Maritime des Chargeurs Réunis) in an attempt to make them more competitive. Nevertheless, by the mid-1980s, freight services were still showing a loss and even the cruise line Paquet Cruises Inc. was failing in its efforts to differentiate itself in the North American market by emphasizing its French flavor. Keen to consolidate his position in the more profitable textile industry, in late 1986 Seydoux attempted to cut his shipping losses by selling Chargeurs Réunis to the state-owned General Shipping Company (Compagnie Générale Maritime). Unfortunately, the move came at a time when the French government was in the grip of a privatization drive and the Secretary of State therefore rejected Chargeurs’s request on the grounds that, if anything, it smacked of nationalization, rather than privatization.
Undaunted, Seydoux succeeded over the next two years in gradually selling off most of his peripheral shipping concerns. Bulk freight vessels were sold to Louis Dreyfus and the Far Eastern line to the Danish company Maersk. Finally, in January 1988, Chargeurs announced the sale of Chargeurs Réunis to the French group Delmas-Vieljeux. The sale added five lines, over 10 vessels, and 400 employees to the Delmas-Vieljeux haul. The French government expressed satisfaction and congratulated itself on having two major shipping concerns within its borders, one public and one private. For Chargeurs, the sale represented a definitive break with shipping and a much-needed influx of cash with which to finance expansion into the communications field.
During this time, the air transport division, under the flagship UTA, had been performing respectably. The company had carved out a niche for itself in Africa and the Far East and the addition of a direct flight between Paris and San Francisco had proven particularly profitable. Nevertheless, opportunities for expansion seemed limited, due mainly to the highly regulated nature of the French airline industry. A government act of 1963, dubbed the “Yalta Air” agreement by critics of the plan, had effectively divided world routes between UTA and the national carrier Air France, with the competitor Air Inter being given some domestic flights. The protectionist agreement was designed to prevent destructive price competition between the three French companies by giving each its own territory. Under the agreement, for example, UTA flights from Tahiti would stop in Los Angeles, where Air France would take over for the European leg of the trip. As a result of this operating environment, UTA expansion was less than dynamic. The new San Francisco route, inaugurated in 1986, involved intense government lobbying and infuriated Air France, which regarded North America as its rightful property.
The UTA image remained untarnished until 1988, when a dispute arose between company management and representatives of the National Airline Pilots’ Union regarding pay levels at UTA subsidiary Aéromaritime, a charter airline serving several UTA routes. When parent company Chargeurs proposed reorganizing Aéromaritime in an effort to remain competitive in the cutthroat charter business, pilots at UTA promptly went on strike. They quite rightly feared that the reorganization would mean pay cuts. In a protracted dispute which lasted the better part of a year, negotiators on both sides accused the other of bad faith and breaking their word. The strike was finally settled in October 1989 with an agreement which was in effect a compromise. The pilots were guaranteed that no jobs would be lost before 1993, but pay cuts were indeed introduced.
The ugly strike, and the threat that it could erupt again in 1993, may have been one of the factors that contributed to Seydoux’s decision to sell off 55 percent of UTA to Air France in 1990, and a further 13.5 percent in 1991. The sale brought a considerable sum into the Chargeurs war chest, which Seydoux immediately set about spending on other ventures. Air France, for its part, mushroomed overnight into the seventh largest airline in the world behind TWA and Japan Airlines. This phenomenon had serious consequences for the future of deregulation in France, since the state carrier now had a virtual monopoly on air travel outside the country.
Communicating with the 1990s
Meanwhile, Chargeurs was continuing to explore expansion into a number of television and movie production companies. One of the earliest ventures was in 1986, when Chargeurs obtained a 31 percent interest in France 5, owner of France’s new fifth television channel, known as “La Cinq.” The channel was extremely successful during its first year of operation, quickly garnering almost 20 percent market share in areas where it was available. Shareholders were therefore incensed when the government canceled France 5’s concession and gave it to a new company, Société pour L’Exploitation de la Cinquième, which subsequently took over many of the shares and most of the programming and facilities of France 5. Chargeurs promptly obtained a 10 percent interest in the new company, at the same time filing a lawsuit against the government for breach of contract. In 1987, Chargeurs obtained a 50 percent share in Renn Productions, which had produced such popular films as The Bear, Valmont, and Jean de Florette.
In the same year, Seydoux negotiated a ten percent interest in the new British Satellite Broadcasting (BSB) company, due to begin broadcast of three satellite television channels in the United Kingdom in 1990. The new venture appealed especially to Seydoux’s vision of dynamic expansion, and he committed a sum in excess of FFr200 million (US$42 million) to BSB. In November 1990, BSB merged with a second satellite television station, Sky TV, creating a new company known as BSkyB, which boasted two pay-TV channels, a sports channel, a general entertainment channel, and an information channel. Investors were heartened by the success of the new venture, which by mid-1991 had 1.8 million subscribers. The movie channel was particularly popular, with 800,000 British subscribers. In August 1990 Chargeurs bought out historic Pathé Cinéma, founded in 1896 by Charles and Emile Pathé and one of the oldest film companies in Europe. With the purchase, Chargeurs acquired the rights to 245 films, including the classics Les Enfants du Paradis, and La Dolce Vita. Pathé Cinéma also operated a television production division and extensive movie theater facilities. The new purchase added glamour to the existing film distribution division, which had purchased rights to a number of Hollywood blockbusters including Driving Miss Daisy and Dances with Wolves. It also established the Seydoux family as among the most prominent in the French film industry—Seydoux’s younger brother Nicolas had long controlled producer and/Distributor Gaumont. In the 1990s, the company added to its communications portfolio by increasing its share of BSkyB to 17 percent, acquiring the Netherlands-based chain of MGM movie theaters, while Pathé expanded its position by introducing the multiplex theater concept to Europe. In 1994, the company also took controlling interest of the struggling left-wing French daily Libération —a seemingly unlikely development for one of France’s richest capitalists whose primary interest seemed to lie in television and film production. Nonetheless, Seydoux was merely continuing a Schlumberger family tradition, which included ownership of the Communist daily L’Humanité and the Nicolas Seydoux-controlled Le Point.
Diversification within the textile business was no less extraordinary. Between 1986 and 1991, Chargeurs added a number of large manufacturers and distributors to its portfolio. Acquisitions included Roudére, a manufacturer of natural fabrics which was purchased in 1987, and the wool weaving concern Tiberghien Brothers. In addition, during the summer of 1987, Chargeurs systematically purchased stock in textile conglomerate Prouvost in an attempt to take control of that company. Members of the Prouvost and Lefebvre families were approached personally in a strategy that the French press characterized as a “typical American raid.” In spite of these aggressive efforts, Chargeurs failed to take control of the Prouvost management, although it did win minority voting rights in the company. As a result of the more general expansion program, however, Chargeurs met its goal of becoming the world leader in wool combing and trading. Other activities of the textile division included production of interlinings for clothing manufacturers and car fabrics for the automotive industry.
By the early 1990s, Seydoux had not only changed the name of the company he took over in 1981, but also radically altered the nature of its business. Shipping and air transport had given way to movie production and satellite TV, while textiles provided the backbone of company activity. But by the mid-1990s, the company’s multiple personalities were beginning to become a burden. In 1996, Seydoux acted again, splitting his company into two.
Several factors led up to this decision. Chief among these was Seydoux’s conviction that Chargeurs stock was undervalued on the market, as analysts found it difficult to provide a valuation for a firm with such divergent interests. But Chargeurs was also undergoing a period of financial trouble in the first half of the decade, due in part to the worldwide recession and the Persian Gulf War. Added to this was the sudden dropout of China—the world’s largest wool market—from the market in 1993. In the face of its economic difficulties—including a revenue drop of some 16 percent—the company slashed 1,700 jobs from its payroll in 1993. While the company’s industrial divisions were suffering, its communications operations (apart from its BSkyB holdings, which were performing splendidly, but remained unconsolidated from the company’s balance sheet) were also struggling. By 1995, a series of failed films, including Pirates and the infamous Showgirls, caused a loss of FFr188 million, the difficulties at Libération (the result of a declining subscriber base and an increase in the cost of paper) added another FFr140 million in losses, and, coupled with the company’s industrial losses, helped bring Chargeurs’s consolidated losses to FFr575 million for the year.
Seydoux announced his intention to split the company in two in February 1996. Such an operation had already become quite common in the United States and the United Kingdom (with the breakups of ATT and ITT providing examples), as a means for diversified companies to clarify their operations for the investment community. In France, however, the spinoff was unheard of, if only because, under French fiscal law, such a move was looked upon as the dissolution of the company—which would be heavily taxed. Seydoux, however, was able to avoid this fate, reaching an agreement with the government that contained the provision, among others, that Seydoux and his family would guarantee to maintain their shareholdings in both new companies for at least five years.
The splitup of Chargeurs took place in June 1996, creating Chargeurs International, which inherited the company’s industrial operations, and Pathé, which took over the smaller communications holdings. Seydoux was named chairman and CEO of Pathé, while his right-hand man, Eduardo Malone, became chairman and CEO of Chargeurs International. Both men maintained intimate contact with the two new companies, each serving as vice president of the other.
The move proved successful: the stock price of each new company rose strongly. Meanwhile, both companies returned to the black by the end of the year. At Chargeurs, the company worked to sharpen its focus on its textiles and protective film holdings. Beginning in 1996 and continuing through 1997, Chargeurs International began selling off the various European divisions of its Walon automobile transportation operation; in 1997, the company also entered negotiations to sell its cruise line holdings to Carnival Cruise Lines. Chargeurs International’s revenues stood at FFr8.7 billion for 1996, for a net profit of FFr136 million. Pathé, too, was able to announce good news for the year, with a net income of FFr186 million. For the future, Chargeurs intended to concentrate on expanding the international scope of its industrial holdings, and in particular its world leadership in wool-based textiles. In 1997, the company moved to increase its position in the crucial Chinese market, opening its first manufacturing facilities there.
Chargeurs Textiles; R. Mathelin (97%); Teintures et Apprêts de St.-Quentin; Lainière de Picardie; Delcar SA; Delcar Industrie; Avelana; Roudiere SA; Brantome; Filature et Teinture de Lavelanet; Tissage Central du Sud; Tissage Central de la Martinoire; De Cathalo; Ets Paul et Jean Tiberghien; A. Fiandeira; Lepoutre; Irmen und Richter Textil AG; Société Commerciale Prouvost Lefebvre; Peignage Amédé (97%); Prouvost Lefebvre Bradford (U.K.); Hart Wool (Bradford) Ltd. (U.K.); Prouvost Lefebvre Sabadell; Prouvost Lefebvre Pty (Australia); Hart Argentine; Prouvost Lefebvre Export Sydney (Australia); Riverina Wool Combing; Prouvost-Hart Australie (Australia); Prouvost Lefebvre Inc; Prouvost Lefebvre USA; Prouvost-Hart New Zealand; Otegui Hermanos (Uruguay); Lanera Santa-Maria; Lanas Trinidad; Novacel; Colores Holding; Chargeurs Savamo; Mantica; Société Financière Chargeurs; Chargeurs Finance.
Delanglade, Sabine; Coste, Philippe; and Leloup, Michéle, “Seydoux Tisse Sa Toile, L’Express, August 28, 1987.
Faujas, Alain, “Armistice a UTA,” Le Monde, October 24, 1989.
——, “La guerilla des ailes francaises,” Le Monde, September 27-28, 1987.
Galinier, Pascal, “Chargeurs International Accelère Sa Mondalisation et Poursuite le Recentrage de Ses Activités,” Le Monde, March 13, 1997.
“Jerome Seydoux aux Chargeurs Reunís,” Le Monde, February 10, 1980.
Leparmentier, Arnaud, “Chargeurs Se Coupe en Deux Pour Séduire la Bourse,” Le Monde, June 20, 1996.
“Quand M. Seydoux lágeve le voile,” Le Monde, August 9-10, 1987.
—updated by M. L. Cohen