Italian shock that realised Mestrallet’s dream

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Gérard Mestrallet has been quietly celebrating this week, with a few glasses of his favourite Stella Artois beer, the fulfilment of an old dream – merging his Suez group with Gaz de France. The deal has formed a European energy champion and the third most valuable French CAC40 blue chip company after Total and the electricity group EDF.

The son of a Parisian stationer and a graduate of the prestigious Polytechnique and ENA schools was parachuted in as head of Suez 13 years ago. The company was then known as the Compagnie Financière de Suez. After the nationalisation in 1956 of the Suez canal, which it had managed for about a century, the company gradually transformed itself into an unwieldy financial and property conglomerate and by the time Mr Mestrallet arrived had its back against the wall.

Right from the beginning he set about transforming the conglomerate into a focused industrial group by building on the Belgian energy assets he found in its portfolio.

Already in 1996 he was discussing with the then head of the French state-owned gas utility the possibility of combining one day. In those days it was nothing more than an entertaining exercise in wishful thinking. Gaz de France, along with EDF, was after all a sacred cow of the French state sector.

Instead, Mr Mestrallet went ahead, selling non-core and troubled assets and expanding his energy and water utility activities through a series of acquisitions, including taking over the old Lyonnaise des Eaux water and waste management group. Then, a couple of years ago, he got a real fright which, ironically, helped set in motion the process that has culminated with the Gaz de France merger.

Enel, the partially state-owned Italian electric utility, said it was looking to expand outside Italy and was interested in Suez. The Italians appeared to be considering mounting a joint bid for Suez with French utility Veolia with the idea of splitting the spoils. The energy assets would go to Enel, and the water and waste treatment business to Veolia.

Mr Mestrallet said at the time he had heard nothing from Enel or its chief executive, Fulvio Conti. “I have not had the pleasure of hearing his voice, even by telephone,” he said in his polite, understated manner.

But the Enel threat provoked panic in Paris and the government rushed to the rescue by promoting what had seemed impossible – a merger of Suez with Gaz de France, in the process privatising the gas utility.

For Mr Mestrallet a marathon then began. He had to win over worried politicians, trade unions and investors, and negotiate with the gas utility’s top management an efficient governance structure for the combined group. Two and a half years later, Mr Mestrallet has finally crossed the finishing line. And he seems to have come out on top, even though he had to compromise by agreeing to spin off Suez Environnement, the water and waste management business, which he was – and still is – keen to hold on to.

But it was clearly a price worth paying to pull off his big merger, for which he can only thank Enel’s Mr Conti and the predictably patriotic and protectionist reaction of the French government.

Siemens witch-hunt

Peter Löscher already has plenty on his plate with problems at Siemens – such as dealing with a global economic slowdown and trying to cut 17,000 jobs. So it is surprising that he is devoting so much time to pursuing legal action against former Siemens top managers.

The German conglomerate is set to file a rash of lawsuits that claim millions of euros in damages from a group of up to 10 former members of its management board. Siemens accuses them of failing in oversight duties and allowing a €1.3bn bribery scandal to take place in the group.

But these managers – including such distinguished individuals as Heinrich von Pierer, former chairman, and Klaus Kleinfeld, the company’s ex-chief executive – have already all had to leave. It seems somewhat petty of the company to carry on the campaign against its former top brass in the courts.

Siemens justifies its actions as part of its effort to clean up the group’s culture and instil a greater sense of responsibility and accountability. But there is a risk that the campaign will backfire because of the manner in which it is being conducted. In the case of Mr von Pierer, pursuing legal action seems particularly pointless and unfair. He is regarded as one of Germany’s great postwar industrialists and an architect of the group’s success.

Instead of pursuing former managers, Mr Löscher, backed by his supervisory board chairman Gerhard Cromme, should perhaps focus on Siemens’s immediate industrial and corporate challenges.

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