How The Wolf Got Into The Henhouse At Square D: Schneider: `Dr. Attila' Has Big PlansStewart Toy
Some takeover battles erupt without warning. Others break out after friendly talks go nowhere. Case in point: Schneider's Mar. 4 hostile tender offer for electrical-equipment maker Square D Co. Now, the chief executives of both companies feel baffled and misunderstood. BUSINESS WEEK correspondents visited both men and filed these reports.
The only other time Didier Pineau-Valencienne launched a hostile tender offer, in 1988, employees of the French target company burned him in effigy on the steps of the Paris Bourse. He won nonetheless. Now, those who know him well are betting that the chairman of French electrical giant Schneider will also win his latest fight: a $2 billion tender for U. S. electrical-products maker Square D Co. That's because "he's stubborn," says Andre Levy-Lang, chairman of Banque Paribas, France's biggest investment bank and a Schneider banker. "When he wants something, he makes it happen."
The French executive faces an equally tough rival, however, in Square D's dug-in chairman, Jerre L. Stead. Stead blames an artificially cheap dollar for the "unfair" French raid. Schneider's boss shrugs. "When the dollar was strong, Americans came over and bought up French paintings," says Pineau-Valencienne, an art collector. "Now," he says, "it's our turn to buy."
Blunt talk is a trademark of "DPV," as colleagues call him. "He's a tough guy a l'americaine," says Vincent Mordrel of Paris broker DLP James Capel. Indeed, Pineau-Valencienne has an MBA from Dartmouth University's Amos Tuck School of Business, where he's a trustee, and he calls himself "France's leading Americanophile." But critics use a stronger nickname for him: "Dr. Attila."
SLASH AND BURN? The nickname was actually coined in admiration by his predecessor, Baron Edouard-Jean Empain, who hired the former Rhone-Poulenc chemical executive in 1981 to save a sinking Schneider. A messy conglomerate, Schneider built locomotives, clocks, cannons, and ski boots. Pineau-Valencienne ripped it apart. Battling an irate French government, he put 1,000 workers on the street by liquidating steel unit Creusot-Loire in France's biggest-ever bankruptcy. Now, Schneider's $10 billion in sales is split evenly between electrical products and construction.
Schneider's 59-year-old boss hardly seems a slash-and-burn warrior. A village doctor's son, he is warm, good-humored, and deeply religious. He carries a rosary in one trouser pocket and a pocketknife in the other, a peasant tradition in his native Vendee region of western France, where he still maintains a home. He spent the day before his Mar. 4 tender offer for Square D schussing down Alpine slopes with an old friend, ski champion Jean Claude Killy.
Pineau-Valencienne doesn't think he deserves his bad-guy image. And even the workers who burned his effigy during his 1988 takeover of Telemecanique, an industrial-controls maker, may be inclined to agree. The layoffs they predicted haven't happened. Nor will they at Square D, promises Pineau-Valencienne. He covets the U. S. company for two reasons: to broaden the payoff from Schneider's $400 million research budget and to sell each company's products in the other's home market.
Pineau-Valencienne assails Square D's business strategy as far too inward-looking. "Their idea is small is beautiful, stick to America," says he, noting that only 10.4% of Square D's sales are in Europe. He and Stead have been discussing an alliance for more than two years, he says, but "Jerre just kept saying `no.' " Schneider brass also criticize Stead's defensive tactics, including a "golden parachute" that could net him $3 million or so.
Analysts think the deal makes sense for Schneider, though many say the company will have to raise its $78-a-share offer--already 55% above market. Even at the initial price, the acquisition would cut Schneider's profits 10% this year, from a likely $200 million, on sales of $12 billion, figures DLP's Mordrel. Schneider's stock price quadrupled from 1985 to 1990, enabling its chairman to build a $1.4 billion war chest through three sales of stock and convertible debentures. Company funds would finance half the Square D takeover, with the rest borrowed from two French banks that own 11% of Schneider.
Beyond Square D, Pineau-Valencienne has another goal: He dreams of running a business school. He offered himself to Tuck a few years ago but was turned down. In the 1960s, he taught at a Paris school, where he introduced France to the U. S. case-study method. Dr. Atilla's surgery on a moribund Schneider would make an intriguing B-school case. And as Pineau-Valenciene is aware, so would a takeover of Square D.