Can an American company find happiness–not to mention profits–as the property of a foreign buyer? Those of you wringing your hands over the fate of Chrysler Corp., which has agreed to be acquired by Germany’s Daimler-Benz AG, might want to consider the experience of Square D Co. of Palatine. In 1991, Square D was acquired by France’s Groupe Schneider after a bitter three-month battle to remain independent.
The result may not be a lovefest, but it’s certainly a mutual admiration society. First of all, they’re both in the same business, making electrical equipment. Groupe Schneider put all of its North American operations under the umbrella of Square D, which is run by Americans–and which accounts for 32 percent of sales of the French giant.
“We did not colonize Square D,” said Groupe Schneider’s chief executive, Didier Pineau-Valencienne, in Chicago this week for a regular visit. “I tried–despite internal pressure–to make sure that the French did not impose their views.”
Chris Richardson, the 37-year veteran of Square D who is president and chief operating officer of North American operations, said fear of foreign ownership turned out to be overblown. “I’m equating that a little bit to the issue of diversity in the U.S.–it’s comfortable to do business with the people who look just like you.”
In fact, both men say, the company has benefited by having foreign opportunities for promising employees; young people particularly enjoy the chance to work in different countries, they say. Both men indicated that these are the employees likely destined for senior management.
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“If you have an imperialistic attitude, you lose,” Pineau-Valencienne said. “Uninterrupted, enhanced service was the key for us. If Daimler-Benz and Chrysler can do that, they’ll succeed.”
Trading up: Speaking of success, Pineau-Valencienne is a little miffed that his company isn’t on the radar screen of U.S. investors. Sales and profits have grown each year since the takeover; North American sales were $2.45 billion in 1997, and Square D accounted for more than $2 billion of that.
A year from now, investors will be able to take notice–and act– when Groupe Schneider American depositary receipts begin trading on the New York Stock Exchange. Pineau-Valencienne said he had hoped trading would begin sooner, but the company waited while accounting procedures were switched to U.S. methods.
Noting that only 20 percent of Groupe Schneider’s sales come from France, Pineau-Valencienne said, “We want to enlarge the number of foreign investors. . . . Being global, if you want to raise equity, you need a wide market.”
He’s especially eager to attract U.S. pension fund money. Maybe this isn’t a good time to tell him about activist pension-fund shareholders.
Paper profits: Roger Stone cast himself in an unlikely image this week: trendsetter. The chairman and chief executive of Stone Container Corp. told shareholders that the decision by the family-controlled business to sell out to Jefferson Smurfit Corp. is no isolated event.
“This industry desperately needs more consolidation, and it will occur,” he said.
On that score, he echoes his peers at other paper companies, not to mention scores of analysts on Wall Street who deplore the overcapacity in the industry and resulting depressed prices and earnings. Nevertheless, Stone was pretty optimistic about the business climate ahead.
Paper-mill capacity will be flat, Stone said. And his company has started raising prices that have been hammered over the past year or two: “Demand has pretty well caught up.”
Combined, Stone and Jefferson Smurfit will be the world’s largest paper packaging company and the fourth-largest paper company overall. Although shareholders of suburban St. Louis-based Jefferson Smurfit will own 52 percent of the combined company, Roger Stone will be president and CEO. There’s not much doubt how Stone will be spending the next three years, until his mandatory retirement at age 66: “Our primary focus is to fix up the balance sheet. We’ve got a couple of years of hard work.”
That’s an understated way of saying that the bull market of the past few years skipped Stone Container, which has announced plans to sell about $1.5 billion in assets to lower debt.
Your way: “Manufacturing” doesn’t always mean steel mills or paper plants. In fact, Kraft Foods of Glenview is betting that some darn good manufacturing happens in your kitchens. To that end, Kraft is challenging the culinary whizzes of America to come forward with their recipes for barbecue sauce.
The winning sauce will “be the inspiration” for a new flavor that Kraft will introduce next year; note that the language gives the company lots of leeway on the final recipe. The manufacturer of the winning sauce receives $25,000.
For info, send a self-addressed, stamped business-size envelope to Barbecue Official Rules, Box 35991-OR, Los Angeles, Calif. 90035-0991, or visit www.kraftfoods.com.
And rest easy, readers. We promise not to stack the deck by submitting Aunt Hazel’s recipe.
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E-mail Sallie L. Gaines at [email protected].
E-mail Greg Burns at [email protected].
E-mail regular contributor Michael Arndt at [email protected].