Sequana Capital

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Sequana Capital

25, Avenue Franklin D. Roosevelt
Paris 75008
France
Telephone: (33) 1 56 88 78 00
Fax: (33) 1 56 88 78 77
Web site: http://www.sequanacapital.fr

Public Company
Incorporated:
1848
Employees: 53,600
Sales: $5.8 billion (2004)
Stock Exchanges: Paris
Ticker Symbol: VOR
NAIC: 551112 Offices of Other Holding Companies

Sequana Capital, formerly known as Worms et Cie, has a longstanding history of being one of the most illustrious names in French financial history. The company avoided a hostile takeover attempt in 1997 by agreeing to be acquired by Someal, an investment partnership controlled by longtime Worms et Cie ally, the Agnelli family of Italy, via its Ifil investment vehicle. During the early years of the new millennium, the company restructured its holdings and its major assets now include: Arjo Wiggins, a leading paper manufacturer; Antalis, a paper and visual communication media distributor; fund management company Permal Group; and Société Générale de Surveillance (SGS), an inspection, verification, testing, and certification company. The company adopted its current moniker in 2005.

COAL BEGINNING IN THE 19TH CENTURY

The acquisition of Worms et Cie by Someal marked the end of more than 150 years of active Worms family leadership in the company that bears its name. Although the family would come to represent the new French financial "nobility" in the 20th century, Worms et Cie had decidedly common origins. Born in 1801, Hypolite Worms, a wholesaler and shipping agent, opened an office in Paris in 1841. The end of the French monarchy, reestablished on the heels of the French revolution, was once again in the air, falling before the brief civil war of 1848. In that same year, Worms, together with a number of associates, the families of whom would remain shareholders in the company until the end of the 20th century, began importing English coal to France.

Worms and his associates reorganized the company, forming Worms et Cie, a limited partnership that remained in place until the mid-1990s. Among the features of this partnership was a pyramid-like structure of a small number of directors. For much of the company's history, these directors were also among the company's capitalists. As Worms et Cie diversified over the decades, individual directors typically became responsible for a particular branch of the company's development. For much of the company's history, however, a member of the Worms family provided the company's leadership.

The end of the 1848 civil war led to the creationand brief existenceof the Second Republic. One of the preoccupations of the new civil government was the rising rate of unemployment, particularly in the Parisian region, as the provincial population began a shift to the city center. The government created "national workshops" (ateliers nationaux ) with the goal of providing work for the country's unemployed. While this policy had the effect of attracting still more of the population to the capital cityand further exacerbating the unemployment problemthe availability of a cheap and abundant labor force and the rise in industrial activity came at the right time for Worms et Cie and its coal import business. Worms et Cie prospered, and continued to see its fortunesand financial influencerise, even after the foundering of the Second Republic and the rise to power of Emperor Napoleon III in the formation of the Second Empire in 1852. Under Napoleon, the industrialization of France took on a new pace, fueling the demand for coaland the growth of Worms et Cie. France's increasingly international interests, in parallel with Napoleon III's belligerence, led Worms et Cie to develop a new direction: that of shipping operations. Launched in 1856, the shipping wing of Worms et Cie soon became its principal activity and led the company to expand its operations on an international level.

The company's first foreign office was opened in Port Säid, Egypt, in 1869. The company's operations soon spread throughout northern Africa, especially among France's zone of colonial influence. By then Hypolite Worms was preparing to pass on the company's leadership to the next generation, his nephew Henri Goudchaux. Under Goudchaux, Worms et Cie's shipping empire took on an even greater influence, even as Napoleon III's empire collapsed, replaced by the more durable Third Republic.

While coal-burning steam engines had provided the backbone of the Industrial Revolution, the end of the 19th century saw the emergence of a new type of engine requiring a new type of fuel source: petroleum. Worms et Cie adapted to the new market, expanding its trade activities to include the sale of petroleum, at first for Marcus Samuel & Co., beginning in 1892 and, starting in 1986, Shell of the Netherlands, with principal ports at Egypt, Marseilles, and the Sudan.

20TH-CENTURY INDUSTRIAL FINANCIERS

In the early years of the 20th century, a new Worms name joined the company's group of directors: Hypolite Worms, born in 1889 and named for his grandfather, who had died in 1877. While Henri Goudchaux's interest had focused on expanding Worms et Cie's shipping activities, the younger Hypolite Worms was interested in bringing Worms et Cie beyond merchant activities and into the industrial and financial realms. A first step toward becoming one of France's leading industrial concerns was the company's move into shipbuilding. Encouraged by the French government, preoccupied with fighting World War I, Worms et Cie opened its shipyard near Le Havre in 1916, supplying merchant and other ships. Worms et Cie itself made use of its shipyards, building up a fleet of oceangoing vessels that led the company to create the Nouvelle Compagnie Havraise Pénninsulaire (NCHP), in 1934, launching the company in long-haul shipping.

Meanwhile, Hypolite Worms had brought the company's growing influence to bear on the financial market in the postwar era. In 1928, Worms formed its Services Bancaires (banking services), which evolved into the Banque Worms in the 1960s. In the 1930s, Worms et Cie quickly became a prominent source of investment capital in France's industrial landscape, including financing the creation of the national airline, Air France. On the industrial front, Worms et Cie opened a new subsidiary, Société Française de Transports Pétroliers, dedicated to oceangoing petroleum transportation.

Worms et Cie, which maintained close ties with England, continued operations through World War II, angering the Vichy French authorities; yet the refusal to interrupt its activities also brought the company into difficulties with the French justice system, eager to purge the country of its collaborationist taint, in the postwar years. The company was not, however, convicted of collaborationist activities, and the charges against it were dropped.

COMPANY PERSPECTIVES

Although it has changed its name, the company still has the same mission: to create value for its shareholders through pro-active management of its investment portfolio and to seek out new growth opportunities. Sequana Capital intends to maintain a constant dialogue with the management teams of its investee companies in order to optimize their operating performances, adapt their resources to their needs and market circumstances and implement appropriate measures so as to accompany their growth, while respecting their individual corporate culture.

In the meantime, Hypolite Worms extended the company's financial activities into the insurance industry, taking shares in companies La Préservatrice and La Foncière in 1949. Both companies were nearly as old as Worms et Cie. La Préservatrice had been founded in 1861 in Brussels, before becoming a French corporation in 1877, building up a network of 450 branch offices by the end of the century. La Foncière was founded in 1877, developing fire, transport, and life insurance activities, and worldwide operations by the dawn of the 20th century. Under Worms et Cie's control, the two companies established the basis for the later formation of Athena Assurances, formed in 1989.

EVOLVING IN THE POSTWAR ERA

Worms et Cie's financial activities took on a greater importance for the company in the postwar years, as France's economy boomed with the postwar reconstruction effort. In the 1950s, Worms et Cie began offering complete financing for the construction of factories located outside of France. Worms et Cie's banking wing took on a new dimension with the establishment of the Banque Worms in the mid-1960s, which led to the company's move into real estate leasing with the creation of a new subsidiary, Unibail, in 1968. While the company built its financial activities, it began to slow its industrial operations, closing its shipyard in 1966, and ending its Worms shipping line in 1968. The rest of the company's maritime activities were brought under the umbrella group Compagnie Navale Worms in the early 1970s.

At the start of the 1970s, Worms et Cie took over Pechelbronn, a holding company that took on the role of an important investment vehicle for the firm, and was renamed as Worms et Cie during a company reorganization in 1991. The 1970s proved a quiet time for the company; while continuing its maritime activity, the company's banking arm, and in particular Banque Worms, had become its central activity. The company's industrial activity consisted chiefly of a series of investments, gaining shares in Saint Louis and Arjomari Prioux, but also in such names as Lancel and Dior, and in General Biscuit and Presses de la Cité. However, Worms et Cie's leadership was aging, and the company, which had grown to be identified with establishment France, was seen as slipping toward decline.

The nationalization of the Banque Worms by the French government provided something of a wake-up call for the company. Deprived of its central business, Worms et Cie recognized a need for a new generation of managementand the reappearance of a Worms at the company's helm. Nicholas Clive Worms, born in 1942 and the sole male heir to the family fortune, had joined the family firm in 1970, but was not elevated to a director's position until the early 1980s. Worms quickly surrounded himself with an able group of directors, notably Jean-Phillipe Thierry, leading the insurance wing, while turning his personal attention to the company's industrial investments.

Under Nicholas Worms, the company moved toward a dual focus on insurance and industrial investments. After the loss of Banque Wormswhich had its main branch in the company's traditional headquartersWorms et Cie quickly regrouped its financial activities into Banque Demachy, which became Demachy Worms et Cie at the end of the decade. Worms et Cie also maintained parts of its maritime operations through the 1990sin 1986, Worms et Cie took over the former Elf subsidiary Compagnie Nationale de Navigation, which became the new name for the company's ship-fittings operations. In the same period, Worms et Cie interrupted its shipping operations, selling off the Nouvelle Compagnie Havraise Péninsulaire. The company did not rebuild its shipping activity until the mid-1990s, taking over the management of Total's petroleum transport fleet. This became something of a Worms et Cie specialty, especially with the partnership agreement reached with Compagnie Maritime Belge in 1995.

KEY DATES

1841:
Hypolite Worms, a wholesaler and shipping agent, opens an office in Paris.
1848:
The company incorporates.
1856:
Worms et Cie expands into shipping.
1916:
The company opens its shipyard near Le Havre.
1928:
Services Bancaires (banking services) is formed.
1949:
Worms et Cie buys shares in two insurance companies, La Préservatrice and La Foncière.
1966:
The company closes its shipyard.
1968:
Real estate subsidiary Unibail is created.
1989:
Préservatrice Foncière Assurances merges with GPA Assurances to form insurance subsidiary Athena.
1996:
Worms et Cie reorganizes as a public shareholding company.
1997:
Worms et Cie is acquired by investment group Someal; the company shifts its focus to its industrial investments, including Saint Louis and Arjo Wiggins.
2005:
The company changes its name to Sequana Capital.

By the 1990s, however, the company's insurance arm, Athena, had taken on the central role. Formed in 1989 with the merger of Worms et Cie's Préservatrice Foncière Assurances, with GPA Assurances (former Groupe des Populaires d'Assurances, and including Proxima, CGS, and Athena Banque), Athena reached FRF 18 billion in revenues by the mid-1990s. At the same time, Worms et Cie focused its industrial investments on two vehicles: the group Saint Louis, one of France's leading sugar producers and distributors, and the Arjo Wiggins Appleton paper manufacturing group. In each of these, Worms et Cie built controlling shareholder positions.

After nearly 150 years as a limited partnership, Worms et Cie, which by the 1990s counted nearly 100 partners among the heirs of the founding families, as well as investors among Italy's Agnelli family, and others, reorganized as a public shareholding company in 1996. The change exposed the company to a hostile takeover threat by François Pinault. One of France's most successful entrepreneurs, Pinault had already built the distribution empire Pinault-Printemps-Redoute, grouping the famed department stores with the country's leading catalog sales firm, as well as other retail activities, including the FNAC chain of book, music, computer, and stereo stores. Pinault, however, also was president of Artemis, a fast-growing name in the country's financial-insurance circles. Pinault saw an opening to add Athena to the Artemis portfolio, and rapidly built up a shareholding position in Worms et Cie.

Pinault struck in September 1997 with an offer of FRF 410 per share in cash, valuing Worms et Cie at some FRF 28 billion. Worms et Cie scrambled to shield itself from the hostile takeover attempt. By the beginning of October 1997, the company had found its white knights. Two of the Worms et Cie's major shareholders and longtime investment alliesthe insurance group AGF and the Agnelli family holding vehicle Ifilresponded to Pinault's cash offer with a stock and cash offer worth FRF 465 per share. This offer, which raised Worms et Cie's valuation to FRF 32 billion, took a two-pronged approach. The Athena insurance subsidiary was acquired by AGF, as part of its bid to strengthen its share of the French insurance market. Worms et Cie instead regrouped around its industrial investments, principally its control of Saint Louis and Arjo Wiggins, with a new owner: Someal, a holding company composed of the Worms family (28.2 percent), Ifil (56.5 percent), and AGF (15.3 percent).

The deal was accepted in December 1997, placing Worms et Cie out of reach of Pinault. But the deal also meant the end of active Worms family management in the firm, as Nicholas Clive Worms stepped aside to a board position, with leadership taken by Dominique Auburtin. In addition to the firm's former industrial and maritime holdings, the new ownership took on certain Ifil holdings, including its positions in the hotel and travel group Accor and the Agnelli family's shares in Danone. With its focus on industrial investments, the "new" Worms et Cie was poised to continue its legacy as a pillar of French economic history.

CHANGES IN THE NEW MILLENNIUM

Additional changes were on the horizon for Worms et Cie as it entered the new millennium. Before adopting its new name in 2005, the company made several strategic moves in regard to its holdings. As part of a restructuring plan to reduce debt and shore up profits, the company sold assets and realigned its businesses. In 2000, the company acquired the 60 percent of Arjo Wiggins Appleton it did not already own in a deal worth approximately $2 billion. The following year, it sold its U.S. Appleton Papers Inc. subsidiary to employees and expected to raise nearly $1 billion in the process. Subsidiaries Carbonless Europe and Antalis were created at this time. Carbonless Europe eventually was folded into Arjo Wiggins's operations in 2003. Worms et Cie also exited the sugar business by selling its stake in Financiere Franklin Roosevelt, the parent company of Saint Louis Sucre, in 2001.

By 2005, Worms et Cie's business focus had changed dramatically. Its major assets included: Arjo Wiggins, a leading paper manufacturer; Antalis, a paper and visual communication media distributor; fund management company Permal Group; and Société Générale de Surveillance (SGS), an inspection, verification, testing, and certification company. The company sold a majority interest in the Swiss Permal Group to Legg Mason Inc. in late 2005 while retaining a minority stake in the firm.

The company changed its articles of association and corporate governance system to become a société anonyme with a Board of Directors in 2005. At the same time, it laid the Worms et Cie name to rest and officially adopted the Sequana Capital monikerSequana is the Latin word for the river Seine. In a May 2005 press release, company officials explained that the new name was chosen "to better reflect its vocation, profile, and ambitions. The choice of a neutral name like 'Sequana' avoids any risk of confusion with its investee companies and the addition of the word 'Capital' clarifies its true business activity. The new name therefore more fairly reflects the investment strategy pursued by the Group for several years."

Only time would tell if the company's actions over the past several years would pay off in the long run. While revenue had increased each year from 2002 to 2004rising from $4.6 billion to $5.8 billionnet income was fluctuating due to restructuring charges and challenging economic conditions, especially in the paper sector. In fact, the company posted an $87.3 million loss in 2004. Company management, however, was optimistic that Sequana Capital was on the right path for growth in the years to come.

                                         M. L. Cohen

                              Updated, Christina M. Stansell

PRINCIPAL SUBSIDIARIES

Arjo Wiggins S.A.S.; Antalis; Permal Group; Société Générale de Surveillance (23.8%).

PRINCIPAL COMPETITORS

International Paper Company; Matussière et Forest S.A.; Stora Enso Oyj.

FURTHER READING

Abescat, Bruno, "Le retour des Worms," Nouvel Observateur, May 29, 1987, p. 45.

Almi, Jannick, "Worms et Cie: la contre-attaque des AGF," La Vie Française, October 11, 1997, p. 14.

"AWA Gets Worms As Full Owner," PIMA's North American Papermaker, July 1, 2000.

Bertier, Etienne, "Les Volte-Face de MM. Worms," L'Expansion, April 1, 1988, p. 201.

Chaperon, Isabelle, "Worms & Cie: une mutation conduite á pas comptés," Les Echos, September 22, 1997, p. 27.

Chevrillon, Hedwige, and Yannick Le Bourdonnec, "Worms, le retour aux valeurs familiales," L'Expansion, July 17, 1993, p. 118.

Denis, Anne, and Pascalle Santi, "Worms et Cie: l'avenir d'Athena au centre de la strategie," Les Echos, February 25, 1997, p. 17.

"France's Worms Sees More Restructuring in 2002," Dow Jones International News, June 3, 2002.

"Legg Mason Inc.Completes Acquisition of Permal," Market News Publishing, November 3, 2005.

"Le nouveau Worms & Cie affiche une stratégie centrée sur l'industrie," Les Echos, September 5, 1998, p. 22.

"Name Change for Worms & Cie," Les Echos, May 4, 2005.

Scott, Andy, "Poor Results Lead to Arjo Restructure," Print Week, October 2, 2003.

"Worms & Cie to Sell Appleton to Employees," Printing World, October 8, 2001, p. 27.

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