Didier Le Menestrel

Saga Africa

In 1963, the Paris stock exchange created a segment dedicated to stocks in the Franc zone. Aimed at housing companies located in the former French colonies such as Dahomey (currently Benin), Haute Volta (Burkina Faso) and Gabon, this market segment inluded 33 share issuers on the official listing, for a total market capitalisation of FF567m (0.7% of total French stocks at the time).

Today, the best efforts to create a French-style Commonwealth have clearly failed and the African economy has disappeared from the minds of investors in France. So what has become of the BANQUE DE MAROC, COMPAGNIE DES PHOSPHATES ET DU CHEMIN DE FER DE GAFSA and other SOCIETE DES LIEGES DES HAMENDAS ET DE PETITE KABYLIE, which previously had generations of stockmarket players dreaming? While a few rare groups have survived, such as brewers BRASSERIES DE L’OUEST AFRICAIN and BRASSERIES DU CAMEROUN (suggesting that beer resists all revolutions), issuers were quick to abandon this “exotic” segment of the stockmarket.

Amid the widespread incomprehension, only two company managers were sufficiently smart to take the opportunity to invest in Africa. Firstly, François Pinault, who bought CFAO (Compagnie Française de l’Afrique Occidentale) in 1990, and then SCOA (Société Commerciale de l’Ouest Africain) from PARIBAS in 1996 for a “symbolic Franc”. And above all, Vincent Bolloré, whose admiration for the continent led him to build his current empire via the successive acquisitions of SCAC (1986), DELMAS VIELJEUX (1991), SAGA (1998) and the famous RIVAUD GROUP (1998).

While BOLLORE continues to welcome the steady cash flows generated by its African businesses (more than 50% of EBIT), Mr Pinault’s group has meanwhile tired of its African “cash cow (zebu)”. CFAO was nevertheless an attractive treasure chest that the group regularly dipped into as of 1990 with the sale of the magnificent head offices on the Avenue de l’Iéna in Paris at peak market levels at the time (FF1.3bn). Not to mention exceptional dividends (€500m from 2005-2010) and clever tax moves that enabled the group to finance its shift to a decidedly more glamorous luxury market as opposed to car sales in Africa.

In December 2009, convinced that it had got the maximum out of this non-strategic asset, PPR decided to entrust the future of its African businesses to the financial markets, providing a windfall for smart investors looking for a listed vehicle enabling them to finally participate in the momentum enjoyed by African economies.

Alas, the prey was far too attractive and Japanese group TOYOTA has just ended the story by launching a takeover bid for all of CFAO’s capital at €37.5 per share. While the price-tag on the deal offers a juicy capital gain (+44.2% over 30 months), we nevertheless feel we are losing out on a long-term opportunity. This is reminiscent of PEUGEOT, which was also dethroned by the same Japanese at TOYOTA during the 1970s, whereas its market positions were virtually impregnable.

What can we do now to make the most of the economic boom taking shape across the Mediterranean? A simple solution consists of entrusting a large share of the capital that we would like to invest in the continent to the group that is now better known for its electric cars and stockmarket hits: the African Bolloré clearly warrants our trust over the long term.

More daringly, we could preciously hold onto our CFAO shares and advertise this position in order to get the group’s future owners to agree to work for minority shareholders.

Finally, the most promising means of a future for everyone would be to agree to invest in Africa, to go and meet corporate heads and discover these markets, which still belong to the emerging category!

The Ivory Coast, Ghana and Nigeria stocksmarkets have welcomed us and we should not be scared to carry

Didier LE MENESTREL
Accompanied by the Agressor team