The heirs to a centuries-old Belgian automotive empire were elevated to vice chairmen of their family’s eponymous company, D’Ieteren Group, about a decade ago.
Cousins Nicolas D’Ieteren and Olivier Perier were put on equal footing and praised for carrying the wealthy clan’s firm into the seventh generation.
But the parity lasted just three years, when Nicolas replaced his father as board chairman in 2017. Now, in a move that has blindsided minority investors and is quickly becoming a case study in family corporate governance, Nicolas, 49, has unveiled a costly plan to gain majority control of the fast-growing company by buying out Olivier, 53.
The split, dubbed a “once-in-a-generation shareholding reorganization” by the €10 billion ($11 billion) Brussels-listed firm, is rooted in divisions within the secretive clan, say people familiar with the matter. The scions have different personalities and goals, and the move is designed to head off any future conflict, they said, asking not to be identified because the information isn’t public.
The operation will initially generate billions of euros in dividends, but the payouts will mostly be financed with borrowed money, sparking market concern about debt and future earnings.
“Investing in family firms comes with advantages but also potentially some risks,” said Morten Bennedsen, a professor at the University of Copenhagen and an expert on family businesses. “This is a good example.”
Fait accompli
Unlike the bitter and public battles for control within other ultra-wealthy families such as the Murdochs and Ambanis, the billionaire D’Ieteren descendants’ decision to go their separate ways was made behind the scenes and presented as a fait accompli announced alongside quarterly earnings in September.
“The two cousins were not at an age you would expect something needed to be done,” said Kris Kippers, an analyst at Degroof Petercam. “Given that they were just two and not scattered with brothers and sisters, it was not something that was high on the radar.”
Their move has led to a 15% drop in D’Ieteren Group’s share price and harks back to the way the clan has dealt with succession in the past. By funneling power over the generations into a single male lineage — described by one sixth-generation heir as “clipping” the branches — the sprawling company has not only emerged as one of the world’s oldest still in the hands of a single family but also one with remarkably few related shareholders.
This compares with the dilution seen in some other major fortunes like the automaking Peugeot dynasty, whose two ancestors started a business in 1810 and now has some 200 shareholders stretching into the 10th generation. French luxury giant Hermes International SCA, also founded in the first part of the 19th century, has more than 100 family shareholders.
The D’Ieteren family is worth about $7.5 billion, according to the Bloomberg Billionaires Index, mostly derived from their combined 60.7% stake in the firm, which has been the distributor of Volkswagen brands in Belgium since the end of World War II.
Their fortune has surged over the past six years through a fivefold rise in their company’s share price. Nicolas lives in Switzerland and is a business school graduate, while Olivier, an architect by training, and his mother are based in Belgium.
‘No disagreement’
The media-shy D’Ieteren cousins declined requests for interviews. D’Ieteren Group CEO Francis Deprez said in a written response that the concentration of the family shareholding into a single branch will simplify decision-making and give the company more agility.
“There has been no disagreement between the family shareholders on the group’s strategy,” Deprez said. “Looking forward, each branch of the family has its own investment ambitions and priorities and wants to prepare for the future generational transition.”
While minority investors stand to reap a portion of the deal’s windfall, analysts have raised concerns about the impending steep rise in debt as well as the timing, which coincides with a slowdown in growth at Belron, the car windshield repair and replacement company acquired in 1999. Belron’s earnings had surged in the years after the private equity firm Clayton Dubilier & Rice bought a stake in 2018.
Nicolas plans to tighten his grip through his family office Nayarit, which will acquire an almost 17% stake in D’Ieteren Group from a Perier-D’Ieteren holding company headed by Olivier called SPDG Group. Nayarit’s holding will rise to 50.1% while SPDG’s will drop to 10.6% and then to zero through share sales over as long as five years.
Going forward, SPDG will intensify investments in activities linked to sustainable development like energy transition and recycling, according to its website. The family office already has stakes in about a dozen companies including Lifepowr, which focuses on energy management, according to filings.
Cash cow
Underpinning the financing of Nicolas’ buyout is D’Ieteren Group’s strong growth in recent years — mostly from cash cow Belron, a market leader in Europe and North America with brands such as Autoglass, Carglass and Safelite. It also recently bought PHE, a seller of aftermarket auto parts, and acquired a stake in the construction equipment-parts company TVH.
Belron will pay a special dividend of about €4.3 billion to its shareholders, with nearly half going to D’Ieteren Group — which will in turn pay out €4 billion, part of which will go to the heirs. To finance the operation, Belron will roughly double its debt to €8.9 billion, and D’Ieteren will raise €1 billion of bank loans. As a result, Moody’s Ratings cut Belron’s debt to junk.
“All of a sudden, instead of a relatively conservative and predictable company, it’s going to have debt at every level,” said Andrew Brown, investment manager at East 72 Dynasty Trust, which focuses on family firms.
While Brown isn’t against the move, he’s critical of the D’Ieteren method. “They tried to spin it as a reward to shareholders,” he said. “That’s nonsense. It is a means of maintaining the family control of the company.”
Former Belron CEO Gary Lubner, who is a Labour Party donor in the UK, will get about €140 million of the dividend to be paid out by the windshield company.
To reassure investors, D’Ieteren has emphasized Belron’s track record of paying down debt, including after large dividends in recent years. Of the 10 analysts tracked by Bloomberg who follow the company, nine recommend buying the shares, and one is for holding them.
The deal still has to be approved by regulators and put before shareholders in coming months, but it has nevertheless shaken minority-investor confidence.
Snuffed out
One major source of unhappiness among Belgian individual shareholders is the country’s 30% tax on dividends, which they would have to pay but doesn’t necessarily apply to family offices. The family’s investment firms have received more than €700 million in dividends over the past two decades, according to Bloomberg’s wealth index.
For the few years the cousins served at the same level, there was never much doubt Nicolas would come out on top, said a person with knowledge of the matter. The cousins barely knew each other, and Nicolas had a more forceful personality and the advantage of having his father as chairman. Roland’s family stake was also bigger than Catheline’s.
In cases like the D’Ieterens, minority investors might be concerned about the value being taken out of the company “to fix the family issues,” said Bennedsen, the corporate governance specialist.
“Ultimately, nobody is harmed," he said, "because even those who are kicked out are compensated."