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Company Perspectives
Eurazeo is an investment company with a highly proactive and forward-looking approach to its business. Unlike conventional holding companies, which generally participate only to a limited extent in the management of companies and have relatively stable investment portfolios, Eurazeo and its staff actively seek new investment opportunities and work at enhancing the value of those, already in the Company's portfolio.
Eurazeo is one the world's leading private equity investment groups, with total assets of more than EUR 5 billion. Since 2002, the company has adopted a strategy of focusing its operations on acquiring majority or influential shareholdings in non-listed companies. This strategy helped Eurazeo shift the balance of its portfolio by the mid-2000s, so that more than half of its assets, including real estate holdings, are represented by non-listed entities.
Eurazeo was formed through the mergers of international banking group Lazard LLC's investment vehicles, including Eurafrance and Azeo, and its French real estate holdings Rue Impériale and Société Immobilière Marseillaise, which were merged into Eurazeo in 2004. These mergers served to separate the operations of Lazard and the holdings of the David-Weill family, as Lazard prepared for its public offering in 2005. Eurazeo remains a major shareholder in Lazard, and that holding accounts for a major part of Eurazeo's total assets (nearly one-third in 2003). Other major Eurazeo holdings include stakes in Rexel, acquired in 2004 in a leveraged buyout together with CDR and Merrill Lynch; Eutelsat (36 percent); Fraikin, the former Fiat-owned truck leasing and rental group; a majority stake in Ateliers de Construction du Nord de la France (ANF), a leading French property management group; and Financière Galaxie, acquired in late 2005, which owns the B&B chain of budget hotels in France and Germany.
In December 2005, Eurazeo entered exclusive negotiations to acquire Groupe Materis, a world-leading producer of specialty chemicals for the construction industry. Eurazeo itself is listed on the Euronext Paris Stock Exchange. Patrick Sayer is company CEO and chairman. While more than 50 percent of Eurazeo is now publicly listed, the David-Weill family, along with other founding families, retains a 21.6 percent stake in the company through the holding vehicle SC Haussmann Percier. Lazard also remains a major shareholder in Eurazeo.
Evolution of Lazard Family Investments
The creation of Eurazeo in 2000 represented the merging of various investment vehicles developed by Lazard LLC and the David-Weill family since the 1960s, including Lazard's own long-term shareholdings in a number of its major clients, such as stakes in Danone, Pearson, and Assicurazioni Generali. In 2000, then-Lazard chairman Michel David-Weill completed the consolidation of the various components of the Lazard group into a single entity, Lazard LLC. At the same time, David-Weill began bringing together the several vehicles--including Eurafrance, Azeo, and then Rue Impériale and Société Immobilière Marseillaise--through which the family maintained its control over Lazard. At that time, Lazard was one of the last remaining privately held banking empires.
Lazard stemmed from the fortunes of three brothers from France's Alsace region, Alexandre, Elie, and Simon Lazard, who arrived in the United States in time for the great Gold Rush at the middle of the 19th century. In 1849, the brothers set up a dry goods business in San Francisco, and also began offering banking and currency exchange services. By 1852, the brothers had established a second office, in Paris, called Lazard Frères & Cie, which launched a gold purchasing business. By 1876, Lazard had refocused itself entirely on its banking and financial services operations; the following year, the company established its third office, Lazard Brothers, in London.
Soon after, Lazard cousin Alexandre Weill took over the family business. The Weill family (which later legally adopted the name David-Weill) remained in control of the bank into the 21st century. Throughout most the 20th century as well, the three Lazard offices developed more or less independently. For example, after the British government adopted new rules governing foreign bank ownership, Lazard was forced to sell some 45 percent of Lazard Brothers to SP Pearson in 1919. By 1932, Pearson had acquired 80 percent of Lazard Brothers. In exchange, Lazard gained a significant stake in Pearson as well. This stake, held through investment vehicle Gaz et Eaux, remained at some 10 percent into the late 1990s. In 1999, that vehicle changed its name to Azeo.
Ownership History of Gaz et Eaux
Gaz et Eaux stemmed from the creation in 1881 of a company dedicated to the distribution of water and gas in France's north and western regions. As with many of France's utilities, Gaz et Eaux also developed significant financial operations, including various investment holdings. In 1945, the company lost its gas concession when the distribution of gas in France was taken over the French government. Gaz et Eaux continued to operate its water distribution business during the post-war years. In 1976, however, Gaz et Eaux abandoned its water distribution operations as well, and in 1977 the company was taken over by the Insitut de Développement Industrier (IDI), and a consortium of banks and insurance groups and others including Mutuelle Générale Française, Paribas, Caisse de Dépots, and Elf Acquitaine.
At that time, Gaz et Eaux became merely an investment holding vehicle with an asset base of FRF 87 million. The company made a number of strategic investments into the first half of the 1980s. For example, in 1980, Gaz et Eaux acquired a stake in Germany's Harpener AG; the sale of that shareholding just six years later provided the group with a profit of approximately FRF 1 billion.
Gaz et Eaux's own shareholder base continued to shift about. In the early 1980s, Escaut & Meuse, a holding company for the Escaut and Meuse families, became a major shareholder, while the IDI transferred its stake to insurance group UAP. When Escaut & Meuse became the target of a takeover attempt in 1985, the family shareholders transferred its shares to a consortium including UAP, certain other shareholders of Gaz et Eaux, and another investment vehicle, Eurafrance. That company, controlled by Lazard and the David-Weill family, had already begun investing in Gaz et Eaux in the early 1980s. Gaz et Eaux then took over Escaut & Meuse, and now boasted total assets of more than FRF 2.2 billion.
By the end of 1985, Eurafrance had become Gaz et Eaux's largest shareholder, after transferring parts of its own investment portfolio. This transfer, including 9.8 percent of Chargeurs and 12 percent of Sovac boosted Gaz et Eaux's total assets to more than FRF 3 billion. Through Eurafrance, Lazard controlled a 45 percent stake in Gaz et Eaux.
Eurafrance as Part of the Lazard Investment Strategy
Eurafrance had been set up in 1969 as Gestion Participations et Placements Parges, and in 1972 acquired control of the insurance group La France, as well as a stake in Eurafrep. Parges came under control of Lazard when that group's real estate vehicle, Rue Impériales de Lyon, which also controlled a majority share of Société Immobilière de Marseillaise, gained a majority stake in 1973. In 1974, Parges took over another majority control of a holding company, CMI Sovac, and changed its name to Eurafrance.
Over the next decade, Eurafrance made a number of important acquisitions, including a stake of nearly 10 percent in conglomerate Chargeurs Reunis in 1974, and a stake in Locatel, among others. In the meantime, the Lazard group acquired other significant shareholdings, including stakes in Chaussures André, Euralux (which owned shares in Generali) and Viniprix through Société Immobilière Marseillaise. Gaz et Eaux, meanwhile, added a number of shareholdings, some of which were transferred from elsewhere in the Lazard group, including stakes in Pearson, Sidel, BSN (later Danone), Sogeit, Société Générale de Belgique, and Eurafrep.
Toward Transparency in the Lazard Group
A first step toward greater transparency--and simplicity--in the Lazard group and the David-Weill family's investment holdings was taken in 1985, when Michel David-Weill, who had by then taken control of the family empire, created Lazard Partners. This group then became the main shareholding vehicle, controlling the U.S. and Paris Lazard companies, as well as the family's stake in the London-based Lazard Brothers. Over the next decade, Lazard Partners continued buying up shares in Lazard Brothers. Into the mid-1990s, David-Weill had gained sufficient control to begin pushing through a consolidation of some of Lazards' operations, including establishing a single company for all of the Lazard group's asset management businesses in 1997. At last in 1998, the family succeeded in acquiring full control, paying Pearson $724 million for its remaining 18 percent in Lazard Brothers. Despite opposition from minority shareholders, David-Weill pushed through the merger of the three Lazard companies, creating a single Lazard LLC, based in New York, by 2000.
The restructuring of the Lazard empire also led to a restructuring of its investment vehicles, including Eurafrance and Gaz et Eaux. These groups provided the David-Weill family and other founding family members with a vehicle for their own long-term investments, and featured the family-owned holding company SC Haussmann Percier (named after the street corner on which the Lazard Paris offices were located) as a major shareholder. At the same time, Eurafrance, Gaz et Eaux, as well as the Lyon and Marseilles property vehicles, each held stakes in Lazard, giving the David-Weill family nearly untouchable control of the bank. In the late 1990s, however, the publicly listed investment companies came under attack: the highly visible French "corporate raider" Vincent Bolloré had gained a 31 percent stake in Rue Impériale, while the banking group UBS Warburg had built up stakes of 10 percent in Eurofrance, 7 percent in Gaz et Eaux (which changed its name to Azeo in 1999, and 5 percent in Immobilière Marseillaise.
These shareholders began to pressure Lazard to simplify its investment holdings, in large part because the complex holding structure was seen as depressing the publicly listed companies' share prices. When UBS Warburg threatened to launch a takeover of Azeo, David-Weill gave in. In 2000, Eurofrance launched a takeover offer for Azeo. After raising its stake to 97 percent, Eurofrance merged with Azeo, forming Eurazeo.
At the time, Eurazeo represented a more or less passive investment group. As Business Week described the company at the time, "although Eurazeo was France's largest publicly quoted investment company, it was mostly a sleepy outpost where Lazard parked the stakes it held in traditional clients."
This changed in 2001, when David-Weill brought in a new CEO for Eurafrance, Patrick Sayer, who had been working for Lazard LLC in New York. Sayer agreed to take over the direction of Eurazeo, on the condition that he be granted the right to act independently of Lazard. As Sayer told Business Week, "I didn't want to be head of Eurazeo and report to Lazard partners." In the face of continued pressure from Eurafrance's minority shareholders, which demanded that the investment company act separately of Lazard, Weill granted Sayer's request. Eurazeo, in which David-Weill retained the majority of voting rights, also became the family's primary vehicle for its Lazard shareholding (with Rue Impériale and Immobilière Marseillaise also owning shares of Lazard).
Eurazeo as Private Equity Leader
In 2002, Sayer led Eurazeo on a redefinition of its strategy. The group now transformed itself into an active capital investment firm with a focus on the private equity and leveraged buyout markets. By then, Eurazeo had already begun to sell off some of its "traditional" holdings, including its stake in Generali. That sale alone raised more than EUR 900 million for the company. The company promptly joined the bidding wars for Royal KPN's yellow pages operation and for Vivendi Universal's selloff of its publishing arm.
Eurazeo struck its first success in February 2003, when the company paid Fiat EUR 764 million to take over majority control of its Fraikin truck and industrial vehicle rental and leasing business. In April of that year, Eurazeo succeeded again, paying EUR 450 million ($486 million) to acquire 23 percent of Eutelsat, the leading satellite operator in Europe. By then, the company had also established a second area of operation, property investment, forming a EUR 100 million real estate investment joint venture with U.S.-based real estate investment specialist Colony Capital.
Lazard had continued to restructure its investment holdings, merging Immobilière Marseillaise into Rue Impériale in 2002. By then, however, David-Weill had given up management control of Lazard to financier Bruce Wasserstein, who was brought in to help revitalize the bank's flagging operations at the end of 2001. Tensions soon grew between Wasserstein and David-Weill, and especially after Wasserstein announced his intention to take Lazard public. In response, David-Weill engineered a merger agreement between Eurazeo and Rue Impériale. In this way, David-Weill strengthened his hold on Eurazeo's shareholding in Lazard, which included veto power over renewing Wasserstein's contract in 2006.
The enlarged Eurazeo now boasted assets of more than EUR 3 billion. The company continued to hone its strategy, adopting an active management approach for its takeover candidates. The company added its next major deal in late 2004 when it joined the leveraged buyout, together with CDR and Merrill Lynch, of leading European electrical equipment distributor Rexel.
Eurazeo, by then already the leading European private equity investment group, struck a new deal in late 2005, when it bought Financiére Galazie, the holding company for the B&B budget hotel chain. By the end of that year, Eurazeo had already launched its next acquisition, gaining the exclusive right to negotiate a takeover offer for Groupe Materis, a leading producer of specialty chemicals for the construction industry. With more than EUR 5 billion in total assets, Eurazeo had clearly established itself a major international private equity group in the new century.
Principal Subsidiaries
BlueBirds Participations S.A. (Luxembourg); Catroux; FLM; Fraikin; Fraikin Alquiler (Spain); Fraikin Assets; Fraikin Belgium S.A.; Fraikin Groupe; Fraikin Ltd. (United Kingdom); Fraikin Locamion; Fraikin Locatime; Fraikin Luxembourg; France Asie Participations; Immobilière Fraikin; Locamion; Lotus Asia Investments BV (Netherlands); Lux Tiles (Luxembourg); Malesherbes; RedBirds France; RedBirds Participations S.A. (Luxembourg); SC La Vitrollaise; SCI Cles; SCI Les Boussenots; SCI Les Cars Bleus; Seltra; WhiteBirds France.
Principal Competitors
Vanguard Group Inc; Credit Suisse Group ; Landesbank Baden-Wurttemberg AG ; Standard Life Investments Ltd; ING Belgium N.V.; Bermuda Trust Cayman Ltd; TGI Fund I.L.C.; Swisscanto Holding AG.
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