VideoWhen French energy and transport company Alstom made its debut on three stock exchanges on June 22nd 1998, it did so with the kind of flourish that was expected of Europe's biggest-ever corporate IPO. In Paris, it let loose 700 balloons adorned with its logo. In London, a team of abseilers scaled the stock exchange building, unfurling a huge canvas with news of the IPO. And in New York, a full-scale model of the TGV, the high-speed train that Alstom manufactures, was made to appear as if it had charged down Wall Street and crashed into the exchange.
Such fanfare fitted right in with the market euphoria of 1998. Though quickly surpassed by even giddier IPOs in 1999 and 2000, a record 368 European companies launched listings in 1998, worth a total of €31.5 billion. They did so on a variety of exchanges, from London to Luxembourg, many with multiple listings in Europe and the US.
But the euphoria would be short-lived. For many of the companies launching Europe's big-ticket IPOs in 1998, their early history as public entities would be marked by turbulence, from the bursting of the dotcom bubble and the implosion of Enron to the arrival of Sarbanes-Oxley and the invasion of new, more demanding shareholders. Some have since been acquired, like UK holiday company Thomson Travel, which was bought by Germany's Preussag two years after its float. Others have been part of industry mergers, like Finnish telecoms company Sonera, which hopped into bed with Sweden's Telia in 2002 to form TeliaSonera. The class of '98 also included some casualties, like Gretag Imaging, a Swiss photofinishing firm, which went bust in 2002.
For the '98ers, their first decade as public companies has been a white-knuckle rollercoaster ride, putting executive teams' turnaround and crisis management skills to the test. Their CFOs today look back over the past ten years older, and much wiser. "Whatever a CFO can face, I think I've faced it," says Juha Laaksonen, finance chief since 2000 of Fortum, a €4.5 billion Finnish energy company that listed in Helsinki on December 18th 1998.
Fortum: New Energy
Fortum's market debut, which earned the Finnish state 2.7 billion markka ($540m at the time), had all the excitement and frisson of that era's crop of IPOs. However, the company was among the debutantes whose shares sputtered the quickest. After finishing their first day's trading at 33.8 markka (about €5.6), they languished below that price for most of the next three years.
According to Laaksonen, a big part of the problem was that investors struggled to get their heads around the new company, formed when Finland's state-controlled oil and energy firms merged shortly before the IPO. "It was probably the first merger where a power company and an oil and gas company were put together to become a big energy company in a very wide sense," says Laaksonen, a company veteran who had worked his way up the finance ladder at Neste, the oil side of the business. "The market follows either power or oil, but not both."
An even bigger problem for investors was that Fortum lacked a clear strategy. "The market gave us such terrible comments — 'This company hasn't got any idea where it's going,'" Laaksonen recalls. By 2000, CEO Heikki Marttinen had been ousted by his fellow directors, putting Laaksonen's predecessor, Eero Aittola, temporarily in the chief exec's job until the arrival of Mikael Lilius. Laaksonen, in turn, stepped up to the CFO post.
Under Lilius, the group began to focus on a single goal — to become the Nordic region's benchmark power and heat company. To do that, says Laaksonen, Fortum would use a combination of acquisitions and divestments. And it was important for the board to agree that "nothing was sacred." While it was "very nice" to have businesses in markets as diverse as the UK and Thailand, they had to go if they didn't fit with the strategy. Eventually the divestment programme would include all of the group's oil business, which was spun off in an IPO in 2005, further refining its strategic focus. It was an imposing programme.
"The company's market value on September 1st 2000 was €3.1 billion — I remember that very well because we've calculated it so many times," Laaksonen says with a laugh. "We've also calculated that if you take all the acquisitions from just before that time onwards, and all the divestments, we made €7 billion of [each]. That's a huge amount of restructuring compared to the market value of the company when we started."
It was also a big test personally for Laaksonen, whose attention swung "from big restructurings to integrating then demerging a finance function, to funding to selling stories to investors and working on internal development improvements," he says. "It involved keeping a lot of balls in the air at the same time."
The sweat paid off. In a research paper published in 2006, Credit Suisse said the company had transformed itself from a "conglomerate with little strategic and geographical focus to a vertically integrated leader in the Nordic power value chain." In 2007, Fortum posted a €1.6 billion profit on sales of €4.5 billion. Perhaps more importantly, given shareholders' past confusion, its shares are now trading at about €25 after reaching an all-time high of €30 in January.
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