Groupe Louis Dreyfus S.A.
Groupe Louis Dreyfus S.A.
Sales: EUR 20 billion ($22 billion) (2003 est.)
NAIC: 483111 Deep Sea Freight Transportation; 424490 Other Grocery and Related Product Merchant Wholesalers; 424510 Grain and Field Bean Merchant Wholesalers; 424590 Other Farm Product Raw Material Merchant Wholesalers; 424690 Other Chemical and Allied Products Merchant Wholesalers; 424720 Petroleum and Petroleum Products Merchant Wholesalers (Except Bulk Stations and Terminals); 483112 Deep Sea Passenger Transportation; 483113 Coastal and Great Lakes Freight Transportation; 523130 Commodity Contracts Dealing; 424720 Petroleum and Petroleum Products Merchant Wholesalers (Except Bulk Stations and Terminals); 483111 Deep Sea Freight Transportation; 483113 Coastal and Great Lakes Freight Transportation; 531120 Lessors of Nonresidential Buildings (Except Miniwarehouses)
Groupe Louis Dreyfus S.A. is one of the world's largest, family-owned, diversified conglomerates, with interests ranging from grain and other agricultural commodities, to shipping, gas and petroleum refining and marketing, property development, and telecommunications. Commodities trading represents the group's historic core—Louis Dreyfus remains one of the world's leading grains traders—and, in addition to wheat, includes such commodities as cocoa, coffee, cotton, rice, sugar, and oilseeds. In addition to these trading interests, the group is also one of the world's leading producers of orange juice, with operations spanning more than 25,000 acres of Brazilian orange groves, and processing facilities in Brazil and Florida. With a total orange juice concentrate production of 250,000 tons, Louis Dreyfus holds 10 percent of the global market. The company has been in the global shipping industry for some 70 years, owning and operating its own fleet through subsidiary Louis Dreyfus Armateurs, among others. At the turn of the century, the group's fleet included 26 ships and 21 floating cranes, tugs, and barges. Louis Dreyfus's entry into the gas and petroleum markets came in the early 1970s; once focused primarily on the United States, the group's interests in this business has shifted to its Wilhelmshaven, Germany, refinery, which boasts a daily capacity of more than 220,000 barrels. The group is also active in property development, controlling more than eight million square feet of primarily office space throughout North America and Europe. The group's property holdings include a share in the Four Seasons hotel in Washington, D.C. Other group holdings include a majority stake in Brazilian particleboard maker Placas and its Argentinean counterpart Faplac. One of the group's fastest-growing operations, however, is its telecommunications subsidiary LDCom Networks, which has risen to become France's number three provider of wholesale and retail telephone and broadband Internet services, through its own 11,000-kilometer fiber optic network. Louis Dreyfus remains wholly owned by the founding family, led by Gerard (William) Louis-Dreyfus and his cousin Robert Louis-Dreyfus.
Grain Trading Empire in the 19th Century
Léopold Dreyfus was born in 1833 to a farming family in Sierentz, in the French Alsace region, just a few kilometers away from Basel, Switzerland. Dreyfus began carting grain from his farm for sale in Basel when he was just 17 years old. By 1851, Dreyfus had begun trading wheat from neighboring farms as well, and in that year incorporated what is considered to be the world's first international grain trading company. Too young to work under his own name, Dreyfus originally operated under his father's, Louis Dreyfus. The younger Dreyfus later changed his surname to Louis-Dreyfus, founding one of the great French family dynasties.
The company's trading activity expanded quickly in its first decade, and in 1858 it moved its trading focus to the more international Berne market. From there, Louis-Dreyfus began expanding throughout Europe, buying grain in Hungary, Romania, and elsewhere in Eastern Europe to meet the fast-growing demand for wheat and other grains in Western Europe. In 1864, Louis Dreyfus (the family hyphenated the name, but the company did not) moved again, to Zurich, while extending its network of offices into France and Germany as well. The company found its permanent home a decade later, when it established its headquarters in Paris—a result of France's ceding the Alsace region to Germany after the Franco-Prussian War.
The company's expansion was further aided by a number of important developments, notably improvements in transportation with the construction of cross-continental railroad systems as well as more reliable ships. The invention of new communications methods, including the telegraph and telephone, was also an important factor in the group's growth, particularly with the deployment of the first international cables.
These developments enabled the company to grow through the use of arbitrage—buying at low prices in one area in order to sell at higher prices elsewhere—and the company proved adept at locating new and profitable opportunities. Such was the case in 1883, after the Liverpool Corn Trade Association allowed futures trading. Louis Dreyfus became one of the first to take advantage of the ability to buy and sell simultaneously, thereby guaranteeing the company's profits.
By the turn of the century, Louis Dreyfus had grown into the world's leading grain trader, with offices throughout Europe. Russia was one of the group's primary markets, and by the outbreak of World War I, the company counted some 115 offices there. Romania nonetheless remained the group's top market, and in recognition of this the group named its first ship after the country's King Carol I.
In the years leading up World War I, Louis Dreyfus expanded beyond Europe, opening a trading office in Duluth, Minnesota, in 1909, and then establishing operations in Brazil, in 1911, where the company began trading cotton for the first time. The company also ventured into Australia, setting up an office in Melbourne in 1913. In 1915, founder Léopold Louis-Dreyfus died, turning over the family company to sons Louis and Charles. Two years later, the company faced an upheaval of a different sort, when the Soviet revolution forced the company out of Russia.
Despite its setback in Russia, the company remained the world's "King of Wheat," a position it held through the Great Depression and up to the outbreak of World War II. International expansion continued, with new markets including South Africa, where the company opened an office in 1924. At the same time, Louis Dreyfus began expanding its shipping interests. Although the company had long operated a small fleet of vessels supporting its Russian operations, the 1920s and the 1930s saw the company emerge as a major shipper in its own right. In 1932, the company traded in its fleet of eight ships for a new fleet of high-speed vessels designed and built for Louis Dreyfus under the guidance of Pierre Louis-Dreyfus, son of Charles Louis-Dreyfus. When Dreyfus died in 1940, the next generation, which also included François and Jean Louis-Dreyfus, in addition to Pierre, took over as the company's leaders.
World War II devastated the company's operations, as some of the family fled to Argentina, while Pierre Louis-Dreyfus joined the Free French air force in London, flying nearly 80 missions as a tail gunner. Following the war, the group was forced to rebuild. The group once again targeted the shipping and grain trading markets. As Pierre led the reconstruction of the group's shipping fleet, adding a number of new vessels in the 1950s, Jean Louis-Dreyfus led the rebuilding of the group's grain trading operations.
- Léopold Dreyfus begins trading grain and incorporates the following year.
- Company moves trading operations to Berne, and later to Zurich.
- Headquarters are established in Paris following Franco-Prussian War.
- Futures trading begins after authorization by Liverpool Corn Trade Association.
- Company opens an office in Duluth, Minnesota, and begins trading durum wheat.
- Cotton trading begins from new operations in Brazil.
- A new fleet of faster ships is designed for the company.
- Gerard (William) Louis-Dreyfus takes over and broadens company's role from grain trader to diversified trading house.
- The property development market in North America and Europe is entered.
- Louis Dreyfus becomes one of the first to trade oil and natural gas commodities, launching Louis Dreyfus Natural Gas.
- Citrus plant in Brazil is acquired.
- Louis Dreyfus Natural Gas goes public on the New York Stock Exchange.
- Louis Dreyfus Citrus lists on the Paris secondary market; Louis Dreyfus Energy begins electricity commodity trading.
- Telecommunications subsidiary LDCom Networks is launched.
- Louis Dreyfus Natural Gas is sold to Dominion Resources for $1.8 billion.
- LDCom acquires Belgacom, 9Telecom, and KAPTECH to become one of top three French telecommunications wholesale providers.
The intervening years had changed the grain market, which had become much less volatile—and therefore less profitable for traders such as Louis Dreyfus. While the company's competitors, such as Continental Grain and Cargill, adapted to the changing market by adding processing and refining facilities, Louis Dreyfus clung to its image as a grain trader. As Gerard (also known as William) Louis-Dreyfus later told Forbes: "That was one of our major errors. We didn't expand, and it cost us our predominant place in this business. We went from being the first of the five major companies to the fifth. Our business had to be redone."
Gerard Louis-Dreyfus, son of Pierre Louis-Dreyfus, was tapped to "redo" the business in the late 1960s. Raised in the United States by his American mother, the new leader of the group had adopted the American first name of William and had worked for a New York law firm since the late 1950s before being asked to join the group in 1965 by his father. In 1969, at the age of 37, William, or Gerard, Louis-Dreyfus took over as head of the company, using both his French and adopted names.
Gerard Louis-Dreyfus correctly identified his grandfather Léopold's legacy as more than just a simple grain trader—but rather an arbitrage house that should trade in a variety of commodities. Louis-Dreyfus therefore extended the group's trading activities beyond grain for the first time in 1971, with an entry into the property development market. The following year, Louis-Dreyfus took a bigger risk when he went outside the company for fresh trading expertise, hiring a team of seven commodities traders who had been working for Cook Industries, a grain and cotton trading house based in Memphis, Tennessee.
Louis-Dreyfus's gamble paid off as the company quickly expanded into new commodities areas, re-establishing itself as a leading global arbitrage house. A key feature of the "new" Louis Dreyfus was its ability to shift focus from markets where margins were falling—a natural consequence of the arbitrage process—to newly developing, high-margin markets. Such was the case in the mid-1980s, when the company became one of the first to launch the trading of energy products, including oil and gas, as commodities, launching subsidiary Louis Dreyfus Energy Corporation.
Diversified Conglomerate in the New Century
Louis Dreyfus's determination not to repeat the previous generation's mistakes led it on a diversification effort through the 1990s as it not only entered new trading areas, but added production operations as well. Such was the case in 1988 when the group bought an orange processing plant in Matao, Brazil. By the beginning of the 2000s, the group had expanded that business to include operations in Florida as well, with 25,000 acres of orange groves supporting processing capacity of more than 250,000 tons of orange juice concentrate per year—worth some 10 percent of the global market. Louis Dreyfus Citrus was later listed on the Paris stock exchange's secondary market in 1996. The group's diversification focus remained in Brazil, with the addition of a majority stake in Placas, a leading producer of particleboard and related lumber and forestry products and chemicals. The company added similar operations in Argentina, through its control of Faplac.
In the meantime, the company had been building a major position in the North American energy market, paying $59 million for Bogert Oil Company, based in Oklahoma, in 1990, adding an exploration and production business with proven natural gas reserves of more than 100 billion cubic feet. The company also began leasing oil storage terminals, before buying its own from Unocal in 1992, as its trading activity in that sector topped 70 million barrels per year. The rising success of the energy operations prompted management to take part of the company public, with a listing of Louis Dreyfus Natural Gas on the New York Stock Exchange in 1993. The group also sought to extend its petroleum business to the European continent, buying an unused refinery in Wilhemshaven, Germany, from Mobil for $50 million in 1990. In 2001, the company made a temporary exit from the U.S. market, selling off Louis Dreyfus Natural Gas Corporation to Dominion Resources for $1.8 billion.
In the mid-1990s, Louis Dreyfus recognized the emergence of a new commodities market, with the deregulation of the U.S. electricity market. In 1996, the group launched Louis Dreyfus Energy, becoming one of the first to trade electricity as a commodity. Three years later, the group extended its business to the rapidly deregulating European market as well, forming a commodities trading agreement with France's Electricitéde France.
With annual sales routinely topping EUR 20 billion at the turn of the century, the Louis Dreyfus group was one of the few remaining family-owned dynasties that once dominated the global trading market, and the company continued to seek out new markets.
Telecommunications became one of the group's most dynamic new operational areas at the turn of the century, with the launch of LDCom Networks in 1998. LDCom began constructing its own fiber optic network in France in order to support an entry as a bandwidth wholesaler. Louis Dreyfus began considering a public offering for its new subsidiary, and in 2000 convinced another family member, Robert Louis-Dreyfus, to take on the role of LDCom's chairman in support of the proposed offering. Robert Louis-Dreyfus had long pursued his own path in the French business world, notably as head of sportswear group Adidas.
In the end, LDCom remained wholly owned by Louis Dreyfus—and protected from the dramatic crash in the telecommunications sector in 2001. By then LDCom's revenues had reached just EUR 198 million. The crash of the telecommunications sector provided LDCom with the opportunity for impressive growth as it began acquiring other businesses, including telecommunications retailers Belgacom and 9Telecom.
At the same time, LDCom continued developing its network—which reached 11,000 kilometers by 2003—financed in part by renting out new bandwidth before the actual construction began. In this way, LDCom remained debt free, and by 2003, as its sales neared EUR 1 billion, the company had claimed one of the top three spots in the French telecommunications market. In order to support the group's further growth plans, without relinquishing the Louis-Dreyfus family's ownership of the company, Louis Dreyfus launched a $100 million private placement offering through U.S. subsidiary Louis Dreyfus Corporation in November 2003. After more than 150 years in business, Louis Dreyfus's ability to reinvent itself, while clinging to its arbitrage traditions, gave it a solid foundation for the future.
LDCom Networks S.A.; Louis Dreyfus Citrus S.A.; Louis Dreyfus Travocean; Louis Dreyfus Armateurs; Faplac S.A. (Argentina); Resinfor Metanol S.A. (Argentina); Flooring S.A. (Argentina); Louis Dreyfus Property Group (U.S.); Louis Dreyfus Corporation (U.S.); Louis Dreyfus Energy Corporation (U.S.); Allenberg Cotton Company (U.S.); Louis Dreyfus Canada Ltd.; Placas do Parana S.A. (Brazil); Louis Dreyfus & Cie. GmbH (Germany); Compromex S.A. de C.V. (Mexico); Louis Dreyfus Asia Pte Ltd. (Singapore); Coffee Agency S.A. (Spain); Sungrain S.A. (Switzerland); Kopko Ltd. (Israel); Louis Dreyfus Trading Ltd. (U.K.); Louis Dreyfus Australia.
Principal Operating Units
Citrus; Commodities; Energy; Agricultural; Manufacturing; Real Estate; Shipping; Telecommunications.
ADM-Growmark Inc.; CHS Inc.; Connell Company; Kornog Foderstof Kompagniet A/S; DeBruce Grain Inc.; Groupe Soufflet.
Kremer, Victor, "Louis Dreyfus Seen Turning Focus from Power to Gas Mart," Power, Finance and Risk, June 9, 2003, p. 1.
Levine, Joshua, and Graham Button, " 'A' is for Arbitrage: William Louis-Dreyfus Revived his Family's Faltering Business by Applying Great-Grandpa's Original Principles," Forbes, July 15, 1996, p. 116.
"Louis Dreyfus to Be Sold in $1.8 Billion Gas Deal," Houston Chronicle, September 11, 2001, p. 1.
Roberts, Adrienne, "Dreyfus Dynasty Staff in Mourning," Financial Times, February 6, 2003, p. 27.