What is D’Ieteren going to do with one billion euro cash ?
With the sale of 40% of its Belron business, Belgium’s largest car importer, family concern D’Ieteren, is sitting on a pile of one billion euro in cash. Asked by newspapers L’Echo and De Tijd what D’Ieteren is going to do with it , CEO Axel Miller answers “not to be in a hurry in looking for investing the money elsewhere”.
On Sunday D’Ieteren confirmed the late-braking news that is was in the final stage of negotiating a deal with American equity investment group Clayton, Dublilier & Rice (CD&R) to take a 40% participation in its Belron activities, home to the Carglass car repair brand among others.
The Americans are paying 620 million euro for the minority share, but D’Ieteren already got some 450 million one-time dividend from Belron last month, so now it sits on more than one million euro cash.
Valued at 3 billion euro
With the deal Belron is valued at 3 billion euro, which is quite a lot according to analysts who valued it rather at 2 billion (ING), 2,5 billion (Degroof Petercam) or 2,7 billion (KBC). Cars are getting better and car windows are breaking less. That’s one of the reasons Belron’s operational profit is balancing around 6%, much less than in peak years like 2010 and 2011.
But CD&R, that is to invest for the first time in Belgium, is prepared to pay the high price because Belron is worldwide market leader in the business and realizes 40% of its turnover in the US. For D’Ieteren Belron represents half of its turnover, but nearly two thirds of the profits. So why selling it?
Footprint getting to big
Belron’s footprint was getting to big within D’Ieteren, according to Axel Miller. “Belron represents a big part of D’Ieterens portfolio and we don’t want Belron to become D’Ieteren and D’Ieteren to become Belron”, Miller says.
“We wanted to sell partially to find a way to keep a participation in Belron and free resources to continue the development of the company and benefit from it.”
“We think there are other activities with important growth potential to create added value for our shareholders. That’s what we do at D’Ieteren Auto and that’s what we do at Moleskine (Italian luxury notebook maker; editorial note) and that’s what we’ll continue to do with Belron. With a billion euro we are going to look for attracting long term investments.”, Miller adds.
Equity investment group
Does this mean D’Ieteren is becoming an equity investment group? “That’s the group’s history since Pierre D’Ieteren has withdrawn the import contract for the VW Beetle in 1948 to free resources made in the car business and invest in other businesses.”
“We did it in the past with Avis Europe and did it in the nineties with Belron”, Miller explains. “We are an investment company with family values, but we want to work on a professional manner to create added value for all stakeholders”.
No targets yet
Asked whether he already has some targets in mind for further investments, Miller keeps his cards close to his chest. “We have a structural process for this. We don’t feel obliged to invest this money immediately. We stay in a market with enormous amounts of cash available, few possible targets and with prices that are high. We’ll stay very disciplined in reinvesting.”
Staying in the car business
Asked whether D’Ieteren is going to leave the car business within the next five years, Miller is decided. “No, without any question. We are delighted with our position as market leader on the Belgian market with the largest fleet by far, driving around. We still have a lot to do in this profession and we’re counting on staying in for sure”, Miller says.