Lofrede voor Albert Frère bij Bloomberg

Een van Amerika's belangrijkste corporatieve tovenaars heeft donderdag z'n bewondering voor de Knokke-Heistse tweede verblijver Albert Frère dik uitgesmeerd bij de financiële nieuwsgigant Bloomberg. In een bladzijden lange lofrede roemde de New-Yorkse topfinancieel Henry Kravis de inmiddels 81-jarige Frère voor "z'n bovennatuurlijke timing bij het maken van investeringen". Frères Bertelsman-deal vorig jaar geldt voor de Amerikanen als het absolute voorbeeld van zaken doen. Wat ze in de States helemaal intrigeert is het feit dat Frère nog tijd overhoudt om golf te spelen in Knokke-Heist en met de koning van Spanje op patrijzenjacht te gaan. Het hele verhaal rond Albert Frère lees je trouwens op onze website.

Albert Frere Maneuver in Bertelsmann Deal Gets Henry Kravis Nod (Bloomberg)

Albert Frere had a good excuse for his limp the day in 1988 he met French executive Jean Peyrelevade for the first time. A wounded boar had attacked him during a weekend hunting expedition in the Ardennes forest of southern Belgium, leaving a gash in Frere's leg that took 25 stitches to close. ``He was on his back kicking it in the muzzle,'' says Peyrelevade, recounting Frere's explanation for the leg wound.

Frere, now 81, is still hunting both boar and European corporations. In more than half a century, he has turned a family business selling nails and chains into an empire with assets valued at more than 24 billion euros ($32 billion). In the past year, he and his partners earned more than 2 billion euros by selling their stake in Bertelsmann AG, Europe's largest media company. Frere's holding companies are now poised to profit from the pending merger of French utility Suez SA, in which Frere and his partners are the largest shareholders, and government-controlled Gaz de France SA.

As the global takeover boom sets records -- volume this year was $2.4 trillion through June 20 -- Frere, one of Europe's original buyout artists, is grabbing his share. Frere last year bought big stakes in French building materials maker Lafarge SA and liquor purveyor Pernod Ricard SA. The Belgian's family fortune is about 3 billion euros, according to data compiled by Bloomberg.
Frere, who was dubbed a baron by Belgium's King Albert II in 1994, doesn't take the large, public companies he invests in private or appoint his own managers. Instead, he wields influence in corporate Europe through strategic investments, by helping to arrange mergers and acquisitions and sometimes by outwitting his adversaries.

`Uncanny Timing'

``He has uncanny timing in making investments,'' says Henry Kravis, a founder of New York-based Kohlberg Kravis Roberts & Co., who hunts red-legged partridge with Frere and Spain's King Juan Carlos I. Kravis has never done a deal with Frere, although he says he would like to. ``I respect this man so much,'' Kravis says. Kravis points to Frere's July 2006 Bertelsmann transaction as the best example of the Belgian's nose for a profitable deal. In 2001, Frere swapped his 30 percent holding in Luxembourg- based television and radio broadcasting company RTL Group for a 25 percent stake in the German media company. In making the trade, he wrote a clause into the contract giving him the right to float his Bertelsmann shares on the stock market. Last year, he approached the Mohn family, which controls Bertelsmann, seeking 4.5 billion euros for his shares. He got his price after announcing plans for an initial public offering, against the wishes of some Mohn family members.

Billions in Profit

Liz Mohn, who with her family controls Bertelsmann, said in a May 25, 2006, statement that the purchase of Frere's stake guaranteed the company's independence. Frere and partners made an estimated 2.4 billion euros on the sale, according to a July 2006 statement from Groupe Bruxelles Lambert SA, or GBL, a holding company he controls. `Probably the best deal that I've ever seen, ever, is the deal he did with RTL and Bertelsmann,'' says Kravis, who met Frere 15 years ago. ``This was his deal, and he's the guy who really negotiated this.'' Frere has since used the profits from the Bertelsmann transaction to help him become the largest independent investor in Lafarge and Pernod Ricard. In typical style, he bought the stake in Pernod Ricard after a November 2006 hunting trip with Chief Executive Officer Patrick Ricard in northern France. Taking a big stake in a small company and swapping it for a small stake in a large company is one of Frere's preferred investing techniques.

From Tractebel to Suez

In 1996, for instance, he sold his 25 percent holding in Belgian utility Tractebel SA to a unit of Paris-based Suez, which later led to a merger of the two companies and the makeover of Suez into a corporation that last year had 44 billion euros in revenue. Frere and his partners sold the Tractebel stake for 49.4 billion Belgian francs, or about 1.2 billion euros. Their 9.5 percent stake in Suez was worth 5 billion euros as of June 20. Suez's record earnings last year of 3.6 billion euros represent a 32-fold increase since Frere first bought shares 11 years ago. He could profit again through a rise in Suez's share price if the company is able to pull off its merger with Gaz de France, which would make it the largest utility company in the world, with approximately 72 billion euros in revenue. Frere's friendships with kings, presidents, prime ministers and the captains of industry have helped him build his fortune. Still spry thanks to daily spins on a stationary bicycle, Frere entertains them on tennis courts, hunting trips and visits to his homes on the Cote d'Azur and at Knokke-le-Zoute on the Belgian coast.

Whispers with Chirac

The investor joined a crowd of 300 business leaders who came to hear the final New Year's address of outgoing French President Jacques Chirac at the Elysee Palace in January. Chirac took the occasion to give his blessing to the Suez-GDF deal. ``The merger between Gaz de France and Suez is strategic for France and Europe,'' Chirac said. Frere sat between his friend Bernard Arnault, CEO of luxury goods maker LVMH Moet Hennessy Louis Vuitton SA, and Suez CEO Gerard Mestrallet. After the speech, Frere exchanged whispers and a hearty handshake with the president. ``He always gets listened to, and he doesn't talk too much,'' says Felix Rohatyn, U.S. ambassador to France from 1997 to 2000. Rohatyn, 79, who now works as an adviser to Lehman Brothers Holdings Inc., served on Suez's board, of which Frere is vice chairman, from 2001 until 2004.

A Patient Investor

Frere has built his fortune by being patient. GBL first invested in Imerys SA, a maker of specialty minerals and pigments, in 1987. Frere bought his first shares in Suez in 1996 through Belgian utility Electrafina. And he has owned stock in Total SA since 1999. `He's investing for the long term,'' says Tom Simonts, an analyst at KBC Securities in Brussels who tracks three of Frere's publicly traded holding companies. ``He doesn't really care about short-term fluctuations. He's more or less the Warren Buffett of Belgium.'' Once he sinks his teeth into an investment, Frere does what he needs to do to protect it. The Suez-GDF deal, for instance, may be in danger. The French government, now headed by President Nicolas Sarkozy, must pass a law relinquishing state control of GDF for the merger to happen. Sarkozy's new prime minister, Francois Fillon, said on May 23 that his government may seek other options.

Iberdrola Gambit

Frere is prepared. In May, GBL and Cie. Nationale a Portefeuille, companies he controls with his partners, said they had purchased 5 percent of Spain's Iberdrola SA, placing the Frere group among the top five shareholders in Spain's second- biggest utility. Enrique Soldevila, a Madrid-based analyst for Banco BPI SA, says that sets up Iberdrola as a possible new merger partner for Suez. ``The links between Mr. Frere and Suez are a spicy ingredient for new rumors and hypothetical scenarios in terms of mergers and acquisitions in Spain,'' Soldevila wrote in a research note. And Frere's Iberdrola investment produced instant profits -- on paper at least. The company's stock jumped 7.2 percent in the two days after GBL announced it had bought its shares. Frere says he endorses the Suez-GDF merger and is also prepared if it fails. ``We're not choirboys,'' Frere says, sitting in the salon of his Paris penthouse overlooking l'Avenue Foch near the Champs-Elysees. ``We're sufficiently intelligent to find alternatives.''

A Cascade of Companies

The ``we'' in Frere's lexicon refers to the complicated cascade of companies through which he, his family and his partners make investments. At the top of the pyramid is Groupe Frere-Bourgeois, a private holding company that manages the family's money. It's based in Charleroi, the biggest city in French-speaking Wallonia, near Frere's birthplace. Frere- Bourgeois in turn holds direct stakes in two private and one publicly owned corporations with investments across Europe. Brussels-based and publicly listed GBL is the vehicle that controls Frere's investments in large publicly traded companies such as Lafarge, Suez and Total. GBL is 48 percent owned by Geneva-based Pargesa Holding SA, also publicly traded. Frere is chairman of GBL and vice chairman of Pargesa. Pargesa is in turn controlled by Parjointco NV, another holding company, which is 50 percent owned by the Montreal-based Desmarais family, whose chief holding is Power Corp. of Canada. Frere owns the other half through a group of companies headed by Frere-Bourgeois.

CNP Shares Up 41 Percent

A second tranche of Frere family investments flows through Cie. Nationale a Portefeuille, or CNP. The Brussels-listed company has net assets valued at 6.4 billion euros, a nearly threefold increase from a decade ago, according to the company's 2006 annual report. CNP shares have risen an average of 41 percent a year in each of the past three years. CNP, also headquartered near Charleroi, is chaired by Frere's son, Gerald, 56. Gilles Samyn, 57, is CEO. One of CNP's investments is a 19 percent stake in Milan- based Gruppo Banca Leonardo SpA, a mergers adviser and asset management firm run by the former Lazard Ltd. banker Gerardo Braggiotti. Peyrelevade, Frere's former partner in Royale Belge SA insurance, is Leonardo's chairman in France. CNP also owns half of Cheval Blanc, the fabled vineyard in St. Emilion near Bordeaux that Frere bought with Arnault in 1998. The vineyard's 2000 vintage of St.-Emilion Premier Grand Cru sells for $1,600 a bottle. Investors are willing to look past the complexity of Frere's corporate structure. ``From Frere's large address book to his influential billionaire friends, being a minority shareholder in GBL is rewarding in the long run,'' says Danny Wittenberg, whose Brussels-based investment firm Puilaetco Dewaay NV manages 6 billion euros, including GBL shares. ``He has the skill and expertise to find undervalued stocks and push M&A activity -- and what he does for himself he does for minority shareholders too,'' Wittenberg says.

A Friendly Investor

GBL shares have risen an average annual 27 percent since the start of 2004. On June 20, the stock closed at a record 94.1 euros, up 22 percent from a year earlier. ``We don't like to fight,'' says Frere, sporting an open- necked shirt, a four-button jacket, gray pants and black velour slippers. ``What attracts us to an investment is that we are accepted by management. I don't climb in through the rear window.'' Frere isn't overly concerned with the short-term performance of the stocks of the companies he controls, says Thierry de Rudder, who has been a managing director of GBL since 1993. ``Hedge funds look at how well they can do over six to 12 months,'' says de Rudder, 57, who is Gerald Frere's brother-in- law. ``We look at a six- to 12-year view. We go where we think we can play a role and accompany management along a certain strategy.''

Total's Biggest Shareholder

The Frere group's investment in oil company Total is an example. Frere started by acquiring a stake in Belgian oil company Petrofina SA in the early 1980s. By 1987, he had amassed 30 percent of the company; and by the time he agreed to sell it to Total in 1998, he had 41 percent. ``It was the diamond of Belgium,'' he says. ``Petrofina was a Belgian name renowned abroad. With 30 percent, I felt as if I was king of creation.'' When Frere and his partners merged Petrofina into Total, they immediately became the French company's biggest shareholders. The acquisition gave Paris-based Total the financial might to acquire larger rival Elf Aquitaine SA in 1999, making Total the largest euro-listed company today, with a market cap of 142 billion euros. Through various holdings, Frere and his partners currently control 5.2 percent of Total, valued at 7.4 billion euros.

Albert Frere was born in the Belgian village of Fontaine- l'Eveque on Feb. 4, 1926, the youngest of three children. The Freres lived in a two-story brick house whose bottom floor is today a takeout eatery. Frere's father died when he was four, leaving his mother Madeleine in charge of the family nail and chain business.

Taking Charge at 21

Frere, whose formal education ended at high school, joined the family trade full time in 1947 at the age of 21, according to the 1997 biography Albert Frere: The Son of a Nail Merchant (Fayard, 345 pages, 18 euros) by Jose-Alain Fralon. The operation, like others across Europe, slowed to a near standstill under German occupation in the early 1940s. After the war, Frere revived sales by sending envoys to sell his family's iron products across Belgium, benefiting from a building boom. By the time Frere was 28, he had used profits from the family business to acquire a Charleroi steel mill. During the 1940s and '50s, Frere pushed to expand outside Belgium, using telephone books to scour for clients. ``We prospected,'' says Germain Druart, 81, who became Frere's seventh employee in 1952 and worked with him until his retirement 16 years ago. ``We sent letters to companies around the world.''

The Good Life

By 1953, Frere was a wealthy man, with a business that had a profit of 10 million Belgian francs that year, according to Fralon's biography. Frere's office sported a clay tennis court. Michel de Saint Aubain, 65, a former neighbor who now runs an eyeglass shop in Fontaine-l'Eveque, recalls summers in the 1950s when Frere would send his chauffeur to collect him for vigorous games of tennis -- singles at lunch and doubles in the evening. Frere has always been a savvy salesman, Druart says. He recalls that after Frere sold tons of steel to a group of Polish importers, they complained that he never bought anything from Poland in return. He ordered 1,000 bottles of Polish vodka. ``When the truck arrived, it was 1,000 cases, with 15 bottles per case,'' Druart says. Within weeks, Frere had sold the 15,000 bottles to his own employees, Druart says.

Missing the Bad Times

By the early 1980s, the Belgian steel industry was in a downward spiral, suffering from weak demand and high employment costs. When the government offered to buy out Frere in 1983 for 1.13 billion Belgian francs to save jobs, Frere went for it. ``I wouldn't say he missed all of the bad times by getting out then,'' says Peter Fish, managing director at MEPS (International) Ltd., a Sheffield, U.K.-based steel consulting firm. ``But he missed the worst part of it.''
By that time, Frere had already embarked on a new course. On Christmas Eve 1981, Baron Leon Lambert asked him to step in and rescue Groupe Bruxelles Lambert, a financial services and industrial holding company, which was then struggling with 20 billion Belgian francs of debt. Frere paid 2.6 billion francs for 35 percent of GBL, whose assets included oil refiner Petrofina; Belgium's biggest bank, Banque Bruxelles Lambert SA; and insurer Royale Belge.
To revive GBL, Frere sold off Banque Bruxelles Lambert and other assets, using the money to cut debt and expand his holdings of companies such as Petrofina. Today, GBL is the sixth-biggest corporation by market value on the Brussels BEL20 Index of the country's largest companies, with a market value of 15 billion euros. The value of GBL's net assets, including stock and investments in closely held companies, was 16.8 billion euros at the end of 2006, more than double the amount three years earlier.

Milken Fiasco

Since the 1980s, GBL has stayed focused on Europe, de Rudder says, speaking from the firm's spartan Paris offices overlooking the Champs-Elysees. One reason is that its biggest investment in the U.S. went thoroughly sour. In 1976, GBL, then overseen by Lambert, made what Fralon says in his Frere biography was a $40 million investment in New York-based Drexel Burnham Inc., which then became Drexel Burnham Lambert Inc. In the 1980s, Drexel's Michael Milken popularized the junk bonds that helped spur a takeover boom. After Milken pled guilty to five violations of securities laws in 1990 and Drexel filed for bankruptcy court protection, GBL wrote off its 20 percent stake. As a result, the Brussels firm took a charge of 4.3 billion Belgian francs ($120 million at the time) for 1989. ``After Drexel, we wanted to invest closer to home,'' de Rudder says. ``Investments in companies like Total and Suez give us all the international exposure we need.''

Bad Bet on Rhodia

Drexel wasn't GBL's only misstep. In 1999, GBL bought 5.1 percent of Rhodia SA, France's biggest specialty chemicals maker, for 161 million euros. Later, the company almost collapsed under the weight of the debt it accumulated in an acquisition spree. In the five years starting in 2001, Rhodia lost almost 3 billion euros. In 2003, GBL began cutting its stake. Frere got rid of the entire investment in 2004, taking a loss of 4.9 million euros, according to GBL's Web site. Frere declined to comment on the Rhodia investment. At times, Frere has profited from playing the white knight. In 2000, he allied with members of the Taittinger family, buying shares in champagne maker Taittinger SA after U.S. investors Guy Wyser-Pratte and Asher Edelman tried to take control of the company. ``He invited himself, but in a good way because he bought the shares of those unfriendly people,'' says Total CEO Christophe de Margerie, whose mother, Colette, is the daughter of Taittinger founder Pierre Taittinger. ``He was being very straightforward and taking the family into account, but he understood a good deal is a good deal.''

Saving Taittinger

Five years later, Frere offered to acquire all of Taittinger. The family said no, preferring Frere remain a partner. Weeks later, buyout firms including Paris-based Eurazeo SA lined up to make offers for Taittinger. In July 2005, Greenwich, Connecticut-based Starwood Capital Group LLC agreed to buy Taittinger for 2.1 billion euros in cash. CNP, the company that made Frere's investment, made 275 million euros from the sale of its stake in Taittinger and its Societe du Louvre unit, owner of Le Crillon, a five-star hotel on Paris's Place de la Concorde, and of Baccarat crystal, according to CNP's 2006 annual report. More recently, Frere came to the rescue of French construction company Eiffage SA at the behest of CEO Jean- Francois Roverato, who sought Frere's support to fend off a hostile takeover from Spain's Sacyr Vallehermoso SA. In March 2006, Frere acquired 6 percent of Eiffage. ``He made the investment at a delicate moment, and I'm grateful,'' Roverato says.

A Quick 91 Million

It wasn't charity. Nine months later, Frere found buyers for his Eiffage stake and walked away with a net gain of 91 million euros. Today, Roverato is once again fending off Sacyr's efforts to acquire Eiffage. Frere says that he has no plans to let go of the reins of his empire anytime soon. ``We have a team, but I'm the CEO and chairman,'' he says. He then repeats, for emphasis, ``I'm CEO.'' Frere remains in close touch with the managers of the companies he invests in. He calls Suez's Mestrallet at 8 a.m. every Saturday morning, and has for a decade. ``It's not 7:59 a.m. or 8:01 a.m.; it's 8:00 a.m. precisely,'' Mestrallet says. ``It's tradition.'' Mestrallet says they may discuss anything from Suez's operations to the latest news on mutual friends. Frere consulted him, he says, before boosting his stake in Suez earlier this year.
When he rouses business partners, or their spouses, from their sleep, he sends a kilo of Belgian chocolates to apologize. ``I say, 'I hope I didn't disturb you,''' he says with a mischievous smile. ``I know very well that I did but, well, too bad!''

Gerald to Take Over

Frere's son, Gerald, is set to take over as chairman of the Frere-Bourgeois holding company when his father does decide to step aside. ``His succession is settled,'' Gerald says. Frere's 29-year-old daughter, Segolene, sits on the board of two Frere companies, although she doesn't exercise executive authority. Frere's other son, Charles-Albert, died in a car crash in 1999 at the age of 19. Frere friends say that if the octogenarian ever stops working, he won't be easily replaced. ``They're big shoes to fill for anyone,'' Kravis says. ``But he will never retire; he loves it.'' For now, Frere will keep gunning for his next prey - -whether it's boar, partridge or a juicy portion of the next big European acquisition candidate.