The Debutantes

1998 was a bumper year for IPOs. If only the stock-market newcomers knew then what they know now.

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.

“Delivering the restructuring is one of the reasons we have a premium rating in the power industry now,” Laaksonen says. “There is a trust in the delivery, and that was an important process in building confidence in the capital markets that this company is going somewhere.”

Rhodia: Chemical Reactions

Investor confidence was in short supply at another 1998 IPO company, French speciality-chemicals firm Rhodia. After an IPO in Paris and New York on June 25th 1998, and the full demerger from its parent Rhône-Poulenc in 1999, the company ran into trouble. Five years after its debut, it reported an €1.3 billion loss following write-downs worth €850m. As for its shares, at one stage they had lost an eye-watering 95% of their value since the IPO, reaching a low of €0.95 in 2004, with plenty of volatility to boot.


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