This month marks the first anniversary of the restructuring of the Messer Group in which, following divestments, the company returned to full family control. The company, originating in Germany over hundred years ago, has gone through many changes in the past 5 years and gasworld interviewed its CEO Stefan Messer to understand the trials and tribulations of all the changes.
The company was first formed in 1898 by Adolf Messer (Stefan’s grandfather) and was named the Frankfurter Acetylen-Gas-Gesellschaft Messer & Cie in Höchst. It was later renamed in 1945 to Adolf Messer GmbH after consolidating three business areas which included cutting & welding, cryogenic plant and tank manufacturing and production of industrial gases. In 1965, after a merger with part of Knapsack-Griesheim AG, a member of the Hoechst Group, it became Messer Griesheim GmbH. The company expanded throughout Europe and the US and celebrated its centenary in 1998. However in 2001, Hoechst AG (now Aventis) confirmed its divestment from the company with the sale of its shares in Messer to Goldman Sachs (Private Equity Funds) and Allianz Capital partners. The new Board set about re-structuring and divesting some of Messer’s global interests acquired in the mid to late 1990s and improving the profitability of the company.
In late 2003, both Goldman Sachs and ACP decided to exit the business, which lead to almost two-thirds of the company being sold off. On the 20th January 2004, Air Liquide announced that they would buy Messer’s industrial gas operations in the UK, US and Germany. Simultaneously, the Messer family, through their holding company Messer Industrie GmbH (MIG), announced that they would acquire the remaining shares in the old Messer Group. The transaction was completed in May 2004.
Stefan Messer’s Experiences of the Restructuring
How have things changed since you gained control one year ago?
After completely changing the structure in May 2004, the past year has been a very pleasing experience and now the company (the Messer Group) is the biggest family owned industrial gas company in the world. Operations in the UK, US and Germany were sold off allowing the family to regain 100% of the shares of the company and as a result we have focused our efforts and operations in the regions of East and West Europe as well as maintaining China. It has given us a good balance within our portfolio, as on one hand we have increasing economies in Eastern Europe and China, and on the other we have stable countries like France, Spain, Italy, Switzerland and the Benelux countries.
Have there been any negative impacts of the downsizing?
I don’t believe that we have really experienced any but we are maybe a little bit more restricted in our financial resources because it is much smaller then a big listed company. We can’t afford to make very large investments in capital, large hydrogen plants with a typical capital demand of say €50-100 million per plant for example, but we can grow very well in our traditional business. We currently have an expenditure programme of roughly €100 million per year, which we can invest into several new projects.
Of course one negative impact was that we had to sell off our German operations. It was sad as it was where the company began and developed one hundred years ago, and that was a very difficult decision to make, especially knowing so many of the staff that were transferred.
What are the benefits of being a tier two company?
There are a lot of benefits in this area. We are much more flexible and the people are much more identifiable within the company. On the other hand, we had a substantial business in Germany with a very good base for research and development that was sold within the divestment process so therefore, we decided to invest in new research centres opening at the beginning of May this year, on e in Austria and also one in France. The R&D centre in France will be responsible for chemical and food applications and the Austrian Centre will be responsible for metallurgical processes.
Messer Group Corporate Office ///Messer Group
How is the company being managed?
We have three major regions we manage within Europe; Western Europe, South Eastern Europe and Central Europe, all having a regional manager. Each regional manager is actually in control of the biggest company within their region. For example, in Western Europe our largest market is in France and our regional manager there is also responsible for the other countries in Western Europe, and the same principal is applied in the other regions. In South Eastern Europe the regional headquarters are in Budapest, Hungary, and in Central Europe the regional H/Q is in Gumpoldskirchen, Austria. We also retained our business in China, itself large enough to be classified as a region and we have our headquarters in Shanghai.
Is China an important focus point for the group at the moment?
Yes, in China we have 12 legal entities and it is an important area for us. Over the years we have invested roughly over $200 million. Half of our company operations in China are already 100% owned by the Messer Group, and the other 6 are joint ventures. The 6 joint ventures are mainly associated with steel companies where we operate oxygen plants or ASUs. These are successful ventures and we are unlikely to change the current joint venture relationships.
We understand that you have sites in Cuba. Can you clarify the ownership rights of those plants?
I have separate operations in Cuba because when Goldman Sachs was a shareholder of the company, being a US based company, they were required to sell the activity (in 2001), and I personally took over the entity with another partner. So the Cuban operation resides outside of the Messer Group. We operate two ASU plants, one supplies a steel mill in Havana and the other supplies the State-run industrial gas distribution company.
Are there any more locations worldwide where the Messer Group has activities?
We retained our operation in Peru and we also have a small business in Vietnam and Sri Lanka. We also have a small helium trans-filling station in South Korea (a JV with a local partner). While we have enough to keep us busy we are also looking at expanding our East European operations to the Ukraine and Russia.
Does the welding business remain outside of the Messer Group and if so, do you have any plans to integrate it?
We originally divested the welding operations from the Messer Group in 1999. There have been a few changes and additions since then and it\\'s run as a separate group of companies under the name Messer Eutectic Castolin. But also in this case,the Messer family became the major shareholder as from January this year.
What projects do you have underway?
We recently signed an agreement with US Steel to supply a steel mill in Serbia. We will build a new plant, which will come on stream in summer of 2006, and we have several projects in China. One is in Yuxi and the other is in Xiangtan for an iron and steel company in the province of Hunan. We also have a small steam reformer hydrogen production plant in the north of Shanghai and we have recently signed a deal with BH Steel (belongs to the Mital Steel Group)in Bosnia. So we have quite a lot of projects in the pipeline.
Messer’s Future Movements
ASU in Foshan, China///Messer Group
Do you have any plans for expansion through new acquisitions?
We have no plans to acquire new businesses at this moment but we intend to use the coverage of the welding & cutting company as they have activities in Japan, Australia and New Zealand and parts of Latin America. We want to use their infrastructure, and that of the Messer Group, to see if there are symmetries in the sales and marketing structures. We do not want to put them together but we want to use the two sales forces to increase the sales of both companies.
The Messer Group also has a new cooperation agreement with Hangzhou Hangyang, the biggest engineering company for ASUs in China. We signed a cooperation agreement in December 2004 in order to purchase an ASU for our own use, and also to represent Hangyang in Europe to facilitate the sale of their plants within the region.
What are your current priorities?
Our main priority is growing the industrial gases business, as that is where most opportunities are at the moment. With the agreement of our banks we will invest the majority of our total future cash flow in this area. So for us as a small company, we will invest a considerable amount of nearly €100 million in capital expenditure every year – much of it for growth.
Besides economic slowdown, what dangers are there that may impact upon Messer’s future business?
China may pose a problem as they are a fast developing country and even though they are experiencing large growth rates, you never know what will happen in the future there. So this could be one risk. Competition within Europe is getting much stronger at the moment, so this could present a challenge. But on the other hand I see a lot of opportunities and I believe that these opportunities far out weigh any of the risks or threats.
Finally, what do you feel about the industrial gases business as a whole and where do you feel it can go from here?
I think that there is still a lot of room for growth, especially in regions like Asia and Eastern Europe, but also in some application areas. I see big growth in large hydrogen plants although that is not our field. However for the bigger companies I think it will be a very interesting area for future investments.
gasworld would like to thank Stefan Messer for his time and his responses. We aim to carry an interview with leading personalities within the industry on a regular basis.