An Old Shipping Firm in Dire Straits
New court documents provide a window into the civil war that is underway at Louis Dreyfus Company B.V., a privately owned shipping firm responsible for moving 10% of global commodities.
The company is named after the family that has controlled its destiny for 165 years: the Louis-Dreyfus clan. Most members of that family are now looking to divest their ownership shares, partly because they are unsatisfied with the company’s new management.
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The current chairperson, Margarita Louis-Dreyfus, came into the fold as the wife of Robert Louis-Dreyfus, and she took over the firm when he died in 2009. When commodity prices came crashing down two years later, and the family business started to slow, more and more members wanted to head for the exit.
Sugar prices are down 35% since their peak in 2011, a drop that looks cheerful when compared to the 68% plunge in cotton prices. (Source: “Family Feud at Louis Dreyfus, One of the World’s Largest Commodity Traders, Spills Into Court,” The Wall Street Journal, November 3, 2016.)
These price drops were created by a supply overhang, but knowing that fact did little to help Louis Dreyfus navigate the crisis. The company still had to buy out the minority stakes that were attempting to liquidate, which drove the holding company with their controlling equity into a ton of debt.
Founder Léopold Louis-Dreyfus had built the holding company (named Akira) to protect his controlling interest in the shipping firm. He named his wife as one of the three trustees. As she started buying out the minority stakes, Akira accrued nearly $600.0 million in debt.
Business simply isn’t as good as it once was. Louis Dreyfus may ship to 100 countries across the globe, but its net income sank 67% during the 2015 fiscal year. The $211.0 million on its bottom line may be a lot of money to the rest of us, but it represents a sharp fall for the company.
The dramatic plunge has created no end of headaches for management, particularly as the valuation has taken a hit.
A Singaporean investment firm that proposed buying an $8.0 billion stake in Louis Dreyfus in 2009 now believes it is only worth $4.5 billion. Although the firm’s investment is needed to buy out the other partners, it is difficult for such an esteemed brand to take such a big write-down.
