Buyout Investments

Titaniite

Activity

The Titanite group ranks 3rd in the manufacture and distribution of industrial explosives in France with a 22% market share. It is also the French leader in the drilling and mining sector downstream and handles the use of explosives in quarries. It also has a 20% market share in Belgium. Quarries are the main users of industrial explosives consuming 80% of sales. This sector is highly concentrated since three players control 90% of the market. The main component of the business is distribution since companies must have a warehouse nearby within 200 km in order to be able to sell their products to a quarry or to a building contractor. This is why the warehouses have to be well spread geographically, as is the case with Titanite. The company has 8 warehouses in France and 1 in Belgium

Titanite’s activity breaks down as follows:

Context

Titanite was a family company owned by 30 individuals who mostly came from the founding families, the Stouls and the Ehlingers. AXA Private Equity Fund II retained a merchant bank that had followed the group for years to approach the senior management team when it appeared in 2000 that the shareholders were thinking of reorganising the ownership structure. This approach was made in advance of a tender process.

Titanite constituted an excellent foothold in light of consolidation in the European market which was mature and stable with high barriers of entry, notably strict regulations. It was in the middle of having its ownership structure reconfigured with several European players changing hands.

Strategy

Titanite’s strategy was focused on:

• rationalising its portfolio of businesses,
• continuing with the strategic direction chosen in industrial explosives and focusing on customer service (quality, cost, time), notably by decentralising production in the warehouses and expanding the use of liquid cargo,
• taking part in the consolidation of the European industrial explosives market.

AXA Private Equity contributed to creating value by helping the company to :

• develop reporting systems at the group level,
• restructure some of its activities,
• simplify the corporate organisation chart,
• adapt and strengthen the management structure,
• execute the build-up strategy.

Divestment

In September 2004, AXA Private Equity sold Titanite to Fonds Partenaires Gestion and to its management team. The group planned to continue growing rapidly with 2004 revenue forecast at €58.3m, up 12% from 2003. It aimed to become one of the players in the consolidation of the European industrial explosives market.