Bureau Veritas Is Seeking Acquisitions in U.S., Japan

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30 Sep 2008

Veritas SA, the world's second-largest goods-inspection company, is seeking acquisitions in the U.S. and Japan as the economic slowdown may force rivals out of business, Chief Executive Officer Frank Piedelievre said.  The 180-year old company, which tests toys for harmful chemicals and checks petroleum blends on tankers, plans to make ``more substantial'' purchases next year

after ``smaller'' ones for the rest of 2008, the CEO said in an interview in Paris. Industries that Bureau Veritas is examining include the U.S. industrial and construction sectors and food and environment businesses in Japan, he added.
Bureau Veritas, based in Courbevoie, outside of Paris, and rival SGS SA have been accelerating acquisitions to grow in emerging markets and to add clients in industries such oil and mining. Revenue growth excluding acquisitions should ``come close'' to 8 percent in 2009, Piedelievre said. Growth was 13 percent in the first six months of 2008 on that basis. The company is projected to report a 10 percent increase in 2009 revenue, according to the average of 12 analyst estimates.
``They must pay attention to the price they pay for these companies,'' said Jerome Forneris, a fund manager at Banque Martin Maurel in Marseille, France, which oversees $9.5 billion. ``Making acquisitions to further diversify their business is a good thing as this will allow them to weather the periods of economic downturn,''
Shares Decline
Bureau Veritas dropped as much as 1.15 euros, or 3.1 percent, to 35.50 euros on the Paris exchange and traded at 35.90 euros as of 10:38 a.m., giving the company a market value of 3.9 billion euros ($5.6 billion).
The goods inspector has acquired 12 businesses this year with annual sales of about 160 million euros, expanding in Australia and Latin America. Bureau Veritas, whose 300,000 clients include Total SA, Carrefour SA and Mattel Inc., has benefited from rising commodity prices, which are driving demand in the oil and mining industries.
``A lot more companies are willing to be bought today because of the economic slowdown, especially in the U.S. and Europe,'' Piedelievre said. ``The crisis is affecting the small actors the most.''
The Americas accounted for 14 percent of Bureau Veritas's revenue in the first half, while Asia, Australia and the Middle East represented about a quarter of sales.
Governments are stepping up regulation in countries such as Japan, increasing the volumes of business for Bureau Veritas, Piedelievre said.
Construction Slump
``In Japan, new rules on the construction of new buildings in the coming 18 months will allow us to grow, even though the Japanese market itself is slowing down,'' he said. ``There are a lot of opportunities for growth in this country.''
Slowing growth in construction of new buildings, which Bureau Veritas inspects, in countries such as Spain, the second- biggest contributor to its revenue, will probably lead to a drop in sales in this business in the months to come, Piedelievre said. Bureau Veritas's revenue will probably still increase in 2009, lifted by higher sales from Asian operations and from the marine, oil and mining industries, he added.
Next year will be ``a year of growth for Bureau Veritas,'' even barring acquisitions, Piedelievre said. ``Even if we recorded a slowdown for one or two quarters, our business portfolio is sufficiently developed to be able to compensate'' for this. ``We can grow in a tough market.''
Net income may reach 229 million euros this year and 265.5 million euros in 2009, compared with 158 million euros last year, according the average estimate of six analysts compiled by Bloomberg. Piedelievre declined to comment on the figures.

Source: Bloomberg