Compagnie Lebon SA - LBON:France
|Jul 5, 2017|
I enjoy delving into the many family-controlled investment vehicles that European markets have to offer. Many trace their roots back to the Industrial Revolution when new technologies created fortunes and wealth unrelated to nobility, or back to storied banking houses.
There are fewer and fewer of these vehicles, and that makes complete sense. If you were part of a generationally wealthy European family, would you want to invite the public to scrutinize your financial dealings? I am essentially the opposite, coming from a line of farmers and coal miners, but I still would prefer my family's finances remain unobserved. So the steady trend has been for these family-controlled firms to buy out minority holders and go private.
One family company has has bucked this trend is Compagnie Lebon SA. The company was founded in 1847 to provide gas lighting and eventually came to control gas distribution monopolies in France, Spain, and Northern Africa. Following the wave of nationalizations after World War II, the company expanded into industry, banking, financial services, and hospitality. The company even had a role in creating the first modern mutual funds with Merrill Lynch. Today, the company operates a portfolio of of hospitality and real estate assets, plus a private equity arm.
Since its founding, the company has been controlled by the well-established Paluel-Marmont family. In 2015, an article in a French publication ranked the family #479 on its list of the 500 largest French fortunes. The family controls 61% of Compagnie Lebon's shares, though it has turned over management responsibilities to professionals from outside the family. The family patriarch, Jean-Marie Paluel-Marmont, serves as a non-voting director. As is often seen with such old fortunes, the current generation of Paluel-Marmont heirs has expanded into fashion, banking, even entrepreneurialism in the baked goods market.
Compagnie Lebon's hospitality assets are Esprit de France and Sources d'Equilibre.
Esprit de France consists of 9 Paris hotels, 8 being four-star properties and 1 a three-star, plus 1 five-star property in Aix-en-Provence. Esprit de France also seeks to manage hotels for third parties and has a club of affiliated houses and properties sharing similar values across France.
Sources d'Equilibre is a 60% holding of Compagnie Lebon. It owns and operates three health spas and two hotels at the site of historical thermal springs.
Compagnie Lebon's real estate division is known as Paluel-Marmont Valorisation. It invests opportunistically in public and private real estate companies and assets among many different real estate types. The total portfolio is worth 85 million euros.
Finally, the company has an active private equity arm. Paluel-Marmont Capital consists of two funds, SCR PMC 1 and FPCI PMC II. The first consists of pre-2012 investments and is in run-off. The second is currently making new investments, and has accepted capital from investors other than the company. Paluel-Marmont Finance invests both in venture capital and large buyouts. Last, the company has a 5% ownership position in another holding company, Salvepar.
What's it all worth? Well, here at OTCAdventures, we're in the business of providing readers with interesting ideas for further research, not making recommendations or providing price targets. So I'll let you draw your own conclusions. It's more fun that way anyhow, right? However, the company very helpfully publishes its own calculation of value. For 2016, it was 240.3 per share. Earnings for the year were 17.5 per share, so the company's estimate of value works out to 13.7x earnings. That's pretty reasonable. Shares last changed hands at Eur 181.3 for a trailing P/E of 10.4 and a discount to estimated NAV of 25%. So if you do accept the company's figure as reasonable and would be willing to pay more than 10x earnings for Compagnie Lebon, the current price looks pretty cheap. 2016 summary figures are here.
Who knows how long Compagnie Lebon will remain public? Maybe the Paluel-Marmonts will finally tire of the nosy hoi polloi peeking at their holdings. But perhaps not. It does seem that family-controlled companies that have ceded their management to professionals are both more willing to remain public and less likely to suffer from poor corporate governance. So maybe Compagnie Lebon will be publicly-owned for much, much longer. Either way, it's fun to watch these terrifically old companies morph into 21st-century firms.
Alluvial Capital Management, LLC does not hold shares of Compagnie Lebon SA. Alluvial Capital Management, LLC may hold any securities mentioned on this blog and may buy or sell these securities at any time. For a full accounting of Alluvial’s and Alluvial personnel’s holdings in any securities mentioned, contact Alluvial Capital Management, LLC at email@example.com.