Incorporated: 1844 as Fougerolle
Sales: FFr 31.89 billion (US $6.87 billion) (1997)
Stock Exchanges: Paris
Ticker Symbol: Eiffage
SICs: 8711 Engineering Services
Eiffage is one of France’s leading construction and civil engineering groups, posting nearly FFr 32 billion in total sales. Conceived as a federation of companies—with more than 500 subsidiaries in France alone—Eiffage is the result of the 1993 acquisition by Fougerolle of Société Auxiliaires des Entreprises (SAE). Eiffage member companies are specialized in private sector and public construction and civil engineering projects, including building construction, highway and road construction, electrical installation, and civil engineering (bridges, stadiums, and other public structures). Other leading names in the Eiffage group are Quillery, Eiffel, Gerland, SCR-Beugnet, Forclum, and Norelec.
Each of Eiffage’s member companies operate independently of the others, with their own equipment, resources, networks, employees, and corporate cultures, while providing opportunities for synergy and cooperation among member companies. Member companies reflect a similar federation structure, operating more or less as holding vehicles for their own subsidiaries. In this way, Fougerolle, for example, counts more than 40 subsidiary companies, ranging from 80 to 200 employees each, providing the flexibility of localized and specialized services, while offering the backing of a national operation. This localized approach enables Eiffage to respond to a wide range of construction needs, from small renovation projects to largescale engineering intensive works such as the construction of a new Parisian Metro line completed in 1998.
Although the 1990s have been a difficult period for the French construction industry, Eiffage has been able to contain the damage somewhat. Despite the recessionary French economic climate during much of the decade, Eiffage has managed to limit to some extent its slip in revenues, balancing domestic losses with increased international activity. After posting losses of more than FFr 900 million in 1996, the group recovered to achieve more than 400 million in profits for the 1997 fiscal year. France’s return to healthy economic growth in the late 1990s has stimulated new construction and public engineering needs. Nonetheless, Eiffage has been criticized for its focus on France—more than 80 percent of its revenues are achieved domestically—and has begun to step up its foreign presence, including acquiring subsidiaries Soficom in Belgium and Walter Bau in Germany, as well as construction contracts in Africa, Asia, and other European countries. Eiffage also has begun to expand into the services industry, particularly through the group’s 17.1 percent shareholding position in Cofiroute, one of the country’s leading exploiters of the public autoroute network, but also through the development of building and site maintenance activities, through subsidiary Avenir Entretien.
The formation of the Eiffage group has occurred under longtime Fougerolle leader Jean-Francois Roverato, who serves as company president and CEO. A publicly held company traded on the Paris stock exchange, Eiffage also is majority-owned by Eiffage employees, the result of the 1980s employee buyout of founding company Fougerolle. That company, which celebrated its 150th anniversary in the 1990s, is also France’s oldest continuously operating construction and engineering firm.
19th Century Foundation
The Fougerolle name would enter French history with the completion of the Nivernaise canal, a structure totaling 174 kilometers and joining the Loire and Yonne Rivers in the Burgundy region in the 1840s. Philippe Fougerolle, a mason from the central Creuse River region of France, later joined by Jacques Fougerolle, founded what would become France’s oldest construction firm in the 1844. The company would participate in many of France’s greatest public works projects.
Jacques Fougerolle would lose his life in the construction of the Saint Gothard tunnel in the Swiss Alps on the Swiss-Italian border, which, at 15 kilometers in length and carved through the 3,200-meter tall Saint Gothard mountain, remains one of the region’s most important railroad and highway structures. Jacques Fougerolle’s death did not, however, spell the end of the family’s company, which would complete the Saint Gothard tunnel in 1882.
Before the end of the century Fougerolle’s activity would spread through much of France and include for the first time projects in Paris, later to become a principal site of Fougerolle projects. An early Parisian project was the digging of the Metro line connecting the Porte de Clichy with the Place de la Trinité. While Fougerolle expanded its operations in France, it also was participating in international projects, including the construction of the Namur fortifications in Belgium by 1890. In 1903 the company put into place the Adolphe bridge for Luxembourg.
By the turn of the century Fougerolle was receiving projects from farther abroad. In 1908 Fougerolle received the contract for the construction of the Rio Grando del Sul port in Brazil. At the same time, the company was completing some 2,500 kilometers of roads for the soon-to-disappear Ottoman Empire. The outbreak of the First World War, while restricting the company to its French operations, nevertheless called Fougerolle into service; for one project, carried out in 1915, Fougerolle was contracted to add a second passage to the railroad between Paris and Amiens to ensure the supply chain to the French army in its effort to halt the advancing German army.
Building the 20th Century
After the First World War, Fougerolle, now organized under the company name Le Soliditit Frangais, returned to both its domestic and international activities. A chief French project of the period was achieved in 1921, when Fougerolle constructed a series of large-scale dirigible hangars at Orly, later the site of the country’s domestic airport. In the 1920s, in addition, Fougerolle was contracted to build the refitting supports in the shipbuilding port of Toulon; the resulting structure set scale records for the time. The 1920s saw the company extend its business into the French-controlled colonial regions, with the construction of the port of Dakar in 1927 and the building of the Deir Ez Zor bridge over the Euphrates on the border between Iraq and Syria. In the next decade Fougerolle would receive the contract to build a road from Mogaidscio to the Ethopian border.
In the climate of approaching war in the 1930s, Fougerolle participated in the building of the Maginot line, a series of fortifications designed to protect France against German invasion. Just prior to the outbreak of hostilities, the company finished constructing an arm of the Parisian Metro, leading to the Porte de Montreuil.
In the postwar period Fougerolle would play a central role in the French reconstruction, while also fulfilling major projects in the soon-to-be-former French colonies of Africa. Fougerolle had continued to expand its operations, chiefly through adding subsidiaries, while remaining largely decentralized. Its subsidiaries, which tended to range in size from 80 to 200 employees, kept their own names and continued their operations on an essentially local scale. Fougerolle itself remained a relatively small operation, clinging to its independence as the construction industry in France gravitated to a small circle of large, government-influenced or publicly held conglomerates.
Among the company’s major projects of the postwar period are the digging of a hydroelectric tunnel in Tanzania; a role in the construction of the 1,420-meter suspension bridge at Tancarville, near the city of Le Havre; the construction of the Bin el Ouidane dam in Morocco in 1954, followed by the Serre-Ponçon dam in the French Alps in 1960 and the dam and tidal power plant at Ranee on the English Channel; and construction of the Terminal One structure of the new Roissy international airport outside Paris. In 1970 the company reorganized under the name Société des Entreprises Fougerolle Limousin.
Becoming a Major in the 1990s
Fougerolle remained primarily a family-led company into the 1970s. The company, buoyed after nearly two decades of French economic growth, prepared to expand its activities, buying out the Société Nouvelle de Constructions et de Travaux, a building construction specialist, in 1973, and taking over the company Gifor, specialized in laying foundations, in 1974. The Arab Oil Embargo of 1973, and the resulting economic crisis, would cut deeply into Fougerolle’s growth plans. A friendly attempt was made by the French banking leader Paribas to merge Fougerolle into the larger Sopie-Batignolles in 1980. Fougerolle’s insistence on independence, however, would block that move. Then the company ran into trouble on a number of its international construction sites, most notably in Iraq and Nigeria, at the start of the 1980s; taking losses on these projects, Fougerolle was lashed by a new recession and a collapse of the French construction market. By 1982 Fougerolle had been brought near the edge of bankruptcy.
Fougerolle would be rescued by several important shareholders and financial backers, including Paribas, the French oil giant Total, and the French conglomerate Genérale des Eaux, the last of which, taking some 30 percent of Fougerolle, began making plans to merge Fougerolle into its own construction and civil engineering subsidiaries. Placed in charge of rebuilding Fougerolle was Jean-Francois Roverato, heir-apparent to then CEO Louis Lesne. Roverato, who had entered the company in 1975 at the age of 30, already had served as the company’s head of French development and later served as head of its international division. Roverato would quickly succeed in restoring Fougerolle to health—enabling Resne to refuse Genérale des Eaux efforts to take control of the smaller company.
Roverato was named the company’s CEO in 1987. By then, he had initiated the company on an expansion drive, leading Fougerolle into a number of acquisitions of smaller construction, road-building, and engineering firms. As noted, these firms were allowed to continue their independent, locally oriented operations. By the mid-1990s the company would count more than 50 subsidiary companies, operating throughout France and on the international front as well.
Assuming command of Fougerolle, Roverato had asked for—and received—from the company’s major investors the right to open the company to new capital at will. This would come to serve Fougerolle well in its struggle to maintain its independence. By the late 1980s Genérale des Eaux was pushing harder for a merger of the now mid-sized Fougerolle with CGE’s construction division. Paribas, ally and owner of 40 percent of Fougerolle, refused to sell its shares to CGE, thwarting the conglomerate’s aims.
In 1989 Roverato performed a coup that would prevent CGE from proceeding with a hostile takeover. With the participation of Paribas, Roverator announced an employee buyout of Fougerolle’s operations. More than 10,000 Fougerolle employees participated in the operation, which created the employee shareholding group Financiére Fougerolle and gave Fougerolle majority control of 56 percent of its operations. CGE, which had seen its dream of taking over Fougerolle thwarted, increased its own position in the company to 34 percent, giving it a minority position and the ability to block further moves by the company, particularly should Fougerolle seek a fresh expansion of capital. But this block would become effective only after June 1992.
In April 1992 Fougerolle announced that it was taking over the Société Auxiliaire d’Entreprise, or SAE, France’s second largest building construction firm. With nearly FFr 30 billion in annual revenues, SAE was close to three times Fougerolle’s size. Yet SAE had been facing difficulties, with the collapse of the worldwide construction market in the late 1980s, followed by the Persian Gulf War and economic recession of the early 1990s. At the start of the 1990s, with its share price weakened, SAE was facing the threat of a hostile takeover. In 1990 the company weathered a raid on its stock by the Belgian promoter Michel Pelége. SAE was rescued at the time by Fougerolle and Paribas, each of which took some ten percent of SAE’s shares. Two years later, Roverato—eager to shed CGE’s influence on Fougerolle before the June 1992 deadline—approached SAE with a proposition: in exchange for shares in Financiére Fougerolle, the smaller Fougerolle would take over SAE’s operations.
The operation, worth some FFr 5 billion, was a success, bringing SAE and Fougerolle together, while following the company’s long-held federation concept. The united companies, which would adopt the name Eiffage in 1993, became France’s fourth largest construction and engineering firm, with nearly FFr 38 billion in annual sales. Following the takeover, CGE’s part in the group was reduced to less than 33 percent, depriving the conglomerate of its minority block. By 1997 CGE would begin looking to sell off its Eiffage holdings.
Despite the economic crisis of the 1990s, which would wreak havoc on the French and international construction industries, Eiffage continued the expansion course that had been begun by Fougerolle at the start of the decade. The SAE takeover had followed on Fougerolle’s acquisitions of IGB, Fontaine, Gallego, and Clement in 1990, and of Batiment et Genie Civil Thélu, Rosina, GCI, Cattirolo Lepage, as well as 40 percent of Germany’s Walter Bau, and a share in Paris-based maintenance services firm Avenir Entretien in 1991. Following the SAE merger, the company hardly rested, adding more than ten new subsidiaries in 1992 alone, including the Dutch Fraanje and the Belgian Delens. Now known as Eiffage, the company would absorb a number of existing SAE subsidiaries, including Quillery, Eiffel, and Norelec. Several Fougerolle subsidiaries specializing in building construction would be regrouped under Eiffage as well.
After taking control of Walter Bau, with 74 percent of the German company’s shares, in 1994, Eiffage enhanced its French road construction capacity with the 1995 acquisition of Beugnet. In response to the depressed construction and public works market, Eiffage began extending its services capacity, including augmenting its share of Avenir Entretien and acquiring 100 percent of SíES, Paris-based specialist in cleaning services worth some FFr 400 million in annual sales.
Eiffage had managed to resist the collapsing construction market into the mid-1990s. But in 1996, with its revenues slipping back to FFr 32.7 billion, the company posted a loss of nearly FFr 890 million. The company would be forced to make cuts, notably in its real estate and services subsidiaries, without renouncing, however, its interest in building a stronger position in these sectors. At the same time, Eiffage continued to insist on its federation model of construction and public works subsidiaries—despite the inevitable competition that existed among some of its subsidiaries.
France’s return to economic growth would come none too soon for Eiffage. By the end of 1997 the firm’s losses would prove short-lived, as the company once again reported profits for the year—of FFr 605 million, despite the continued decline of its revenues. Although Eiffage would be criticized as too heavily reliant on the French market, which continued to account for more than 80 percent of the company’s sales in 1998, Eiffage’s continued extension into the real estate and services market, including a strong share of the highly profitable Autoroute services company, Cofiroute, looked likely to balance the company’s construction and civil engineering projects in the future.
Fougerolle; Quillery; SAE; Eiffel Construction Metallique; Gerland; SCR-Beugnet; Forclum; Norelec; Soficom; Avenir Entretien; Walter Bau (Germany); SCR; Cofiroute (17.1%).
Barjonet, Claude, “Eiffage entend consolider sonredressementen98,” Les Echoes, March 19, 1998, p. 10.
____, “La reprise du batiment donne du tonus a Eiffage,” Les Echoes, September 15, 1998, p.14.
Bauer, Anne, “Fétant ses cent cinquante ans Fougerolle affirme son rolede fédérateur,” Les Echoes, October 4, 1994, p. 11.
Chevlolot, Pascal, “Bonne surprise sur Eiffage,” Option Finance, March 23, 1998, p. 25.
Nouzille, Vincent, “Et Roverato, le patron de Fougerolle, poursuite son revé: égaler Bouyges,” L’Expansion, February 20, 1992, p. 52.
—M. L. Cohen