Among the venerable French companies, there will be few above Saint-Gobain. One of the first works of this group valued at 27,000 million euros was the installation of the decorations of the seventeenth century in the Hall of Mirrors in Versailles. But any glass house maker, however highly esteemed, must protect himself from the impact of falling rocks. Fortunately, the new CEO, Benoit Bazin, has put up a good protective shield.
The latest to throw bricks at them has been Bluebell Capital, the activist investor whose track record is more intimidating than its name or size would imply. Despite managing an estate of just 250 million euros, last year he managed, together with his allies from Artisan Partners, to overthrow the boss of Danone.
Bluebell poses a serious threat. By targeting less profitable units and with former CEO Pierre-André de Chalendar’s uneasy presence as chairman, Bluebell lands more than one hit.
Like many French companies, Saint-Gobain is guilty of allowing bosses to stay longer than necessary. De Chalendar has been trying unsuccessfully to take over the Swiss chemical group Sika for a long time, and it is very worrying. So is Saint-Gobain’s valuation against its now bigger and more profitable Swiss rival, with an enterprise value of 20 times forecasted gross operating profit this year. Saint-Gobain’s is listed 5 times.
Bluebell’s problem has more to do with timing. De Chalendar promised in March that she would stay for a maximum of two years. That gives plenty of time to find a new president to take Saint-Gobain into a global company: Western Europe accounted for 61% of its $44 billion in sales last year. Nor does it seem that he is hindering the reconstruction efforts that his successor is developing. Benoit Bazin has emerged from fringe markets to focus on North America and the promising niche of low-carbon products. The response so far has been positive: the shares are doing better than Sika’s. There is still a long way to go, but Bazin is not going to rest on the august laurels of Saint-Gobain.
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