Vallourec SA

1890–2002

France's Vallourec SA is one of the world's leading producers of seamless tubes, stainless steel tubes, and drill piping. The company's six operating divisions target its key markets: Automotive Industry, which accounts for more than 17 percent of sales; Oil & Gas, the company's largest division, at more than 38 percent of sales; Mechanical Engineering, including hot-rolled and cold-drawn tubular products, which adds 13.5 percent to the group's revenues; Power Generation, including the nuclear power industry, which provides more than 13 percent of sales; Chemicals & Petrochemicals, with nearly 12 percent of sales; and Construction, which generated 6 percent of Vallourec's sales of EUR 2.55 billion in 2002. Vallourec is especially active through its joint venture with Germany's Mannesmann AG, Vallourec & Mannesmann Tubes (V&M Tubes), held at 55 percent by Vallourec. Mannesmann is in turn Vallourec's single largest shareholder, with some 20 percent of Vallourec's shares. Since the 1990s, Vallourec has successfully internationalized its operations, dropping its reliance on France from 50 percent to just 15.5 percent of revenues. The Americas accounted for more than 30 percent of sales, while Germany added nearly 17 percent to sales. The rest of Europe added more than 16 percent of sales, while Asia and other markets contributed 20 percent to sales. These proportions were expected to shift after the 2002 acquisition of the United States' North Star Tubes. Vallourec is listed on the Euronext Paris stock exchange.

Merging Industrial Groups in the 1930s

The Vallourec name first appeared in 1930 upon the merger of several companies that produced steel tubing in France's North region, yet those companies had all been active since the end of the 19th century. The name Vallourec stemmed from an amalgam of the sites of the combined companies' tubing mills: Valenciennes, Denain, Louvroil, and Recquignies. That company then came under control of the Société Denain Anzin--which later evolved into French industrial giant Usinor.

Yet Vallourec's origins also lay in the Burgundy region, in the town of Montbard, where the Société Française de Fabrication de Corps Creux had been founded in 1895. In 1899, the company's name was changed to Société Metallurgique de Montbard and was listed on the Paris Bourse the same year.

The Montbard company began acquiring other steel mills in the region. In 1907, Montbard acquired a company in Aulnoye, changing its name to Montbard-Aulnoye. In 1937, Montbard-Aulnoye merged with Société Louvroil et Recquignies, forming Louvroil Montbard Aulnoye. The Louvroil site had been in operation since 1890 as the Société Française pour la Fabrication des Tubes à Louvroil. That company had then merged with the Société des Forges de Recquignies, which had started operations in 1907.

Louvroil Montbard Aulnoye acquired Vallourec in 1957 as part of France's great industrial realignment begun under General Charles de Gaulle, which also saw Denain combine with fellow French steel leader Nord-Est to form Usinor (later Arcelor). Following the acquisition, Louvroil Montbard Aulnoye adopted the Vallourec name as its own, and renamed its new subsidiary Sogestra. At the same time, Usinor became the company's major shareholder.

Usinor proved more than a passive shareholder, as the consolidation of the French steel industry continued through the 1960s. In 1966, Usinor acquired another of France's largest steel products producers, Lorraine-Escaut. That company was itself the product of a merger, in 1953, among three steelworks, Société des Aciéries de Longwy, Société Escaut et Meuse, and Société Métallurique de Senelle-Meubeuge. Following the acquisition, Usinor turned over Lorraine-Escaut's steel tubes operations to Vallourec in 1967.

Reorganization in the 1980s

Yet Vallourec's origins also lay in the Burgundy region, in the town of Montbard, where the Société Française de Fabrication de Corps Creux had been founded in 1895.

1891–1987

Vallourec was by then on its way to becoming the leading tube maker in France, particularly after launching its VAM connection system in 1967. The company continued making acquisitions into the 1970s, enabling it to establish itself not only as the country's leading producer of welded and drawn tubes, but also as the only manufacturer in France producing seamless and large-scale welded tubes.

In 1975, Vallourec consolidated its position in the tubes market with the acquisition of Compagnie des Tubes de Normandie. That company dated its history back to 1729, when it began producing lead linings; in 1899, then known as Compagnie Française des Métaux, it switched production to steel tubes. That activity led it to change its name again to Compagnie des Tubes de Normandie in 1957. In 1961, it became part of the Union Sidérurgique Lorraine (Sidelor), which, after merging in 1968 with another major steel group, De Wendel, ultimately became Sacilor. In the mid-1970s, the French government took control of both Usinor and Sacilor, moving them toward a merger in the mid-1980s.

In the late 1970s, Vallourec moved in two directions. It built its own steelworks, in Saint-Saulve, in a move toward vertical integration. That launch of those works enabled Vallourec to supply its own raw steel for its seamless tube production. Vallourec had begun also to move toward more specialized production. In 1979, the company spun off its small welded tubes operations to Usinor subsidiary Tubes de la Providence, which then became known as Valexy. Vallourec remained the majority shareholder of that company, with 64 percent of its shares.

In the early 1980s, Vallourec made a move to diversify its activities, notably with the acquisition of a major stake in construction and public works company GTM. Formed in 1891 as Grands Travaux de Marseille, GTM's origins as a pipe layer for the Marseille sewer system placed it close to Vallourec's product line. Yet GTM had long since diversified, adding electrical works, harbor, tunnel, and other underground construction, by the time of World War I, and extending into oil platforms and structures, nuclear power plants, and parking lots and other concessions from the 1950s.

Following its acquisition by Vallourec, GTM merged with longtime partner Entrepose--founded in 1935 and owned at 90 percent by Vallourec. GTM-Entrepose, as the new company became known in 1982, then became controlled at 41 percent by Vallourec.

The collapse of the steel industry at the beginning of the 1980s, coupled with the Japanese industry heavy investments during the period--which led to an industrywide overcapacity in the mid-1980s--had combined to sink Vallourec into losses by the middle of the 1980s. By 1987, the company's losses had mounted to FFr 452 million.

Vallourec was forced to undergo a major reorganization. This took place through several steps. In 1985, the company spun off its large welded tubes operations to Usinor subsidiary GTS Industries. By the end of that year, the company had relinquished its shares in both GTS and Valexy to Usinor. Vallourec then became a specialist producer of seamless tubes.

Next, Vallourec began divesting its noncore operations, such as its Société Industrielle de Banque, divested in 1985. The following year, the company restructured as a holding company, creating three primary divisions: Vallourec Industries, for its tubes production; Sopretac, for its steel production and other metals-related operations; and Valinco, which took over its shareholding in GTM-Entrepose and other civil engineering and construction holdings. In 1987, Vallourec Industries was renamed Valtubes.

1988–1996

In that year, also, Vallourec turned to its major shareholders, Usinor and Nord-Est, to help it put together a rescue package worth some FFr 300 million. Nord-Est balked, however, and instead announced its desire to sell off its stake in Vallourec. The company's management, then led by Arnault Leenhardt, took the risk and put together a buyout of Nord-Est's nearly 20 percent stake in the company. By the following year, Vallourec had once again returned to profitability, posting earnings of FFr 770 million on sales of FFr 7 billion.

In 1988, Vallourec's streamlining continued, with the sale of 49.5 percent of Valinco and its holding in GTM-Entrepose to French construction giant Dumez. By 1991, Vallourec had turned over all of Valinco to Dumez, thus exiting completely the civil engineering and construction sectors. GTM-Entrepose and Dumez later became GTM Group, which became one of the core members of the later Vinci group.

Internationalization for the New Century

Vallourec began targeting new markets in the 1990s, particularly the international market. This effort transformed the company's operations in barely more than a decade, from a reliance on the domestic market--France represented more than half of Vallourec's sales at the beginning of the decade--to a company that generated some 85 percent of sales internationally, and more than half outside of the European Union. At the same time, Vallourec began targeting new markets, with a special emphasis on the oil and gas power generation industries, for its seamless tubes.

Meanwhile, despite the difficult economic period, Vallourec remained in good shape, thanks in part to the selloff of its noncore holdings during the 1980s. With a war chest of some FFr 1 billion, the company began targeting acquisitions. In 1992, the company acquired the automotive division of Usinor-Sacilor's Tubeurop subsidiary. The purchase added five factories and three subsidiaries, Ficam, Lita Tubi, and Valexy Automobile Haumont, as well as additional revenues of FFr 800 million. It also positioned Vallourec at the forefront of the market as the automotive industry increasingly adopted seamless tubing as a number of systems, such as power steering, became standard features.

A step toward the internationalization of the company's operating base came in 1994 with the purchase of British Steel's Tubular Industries, based in Scotland, which had previously held a license to manufacture products using the VAM connection system. Similarly, Vallourec acquired Mexico's Prinver, which held the VAM license in that country.

In 1994, also, Vallourec joined with Germany's Mannesmann and Italy's Dalmine to form DMV Stainless, combining the three groups' seamless stainless steel tube operations. Initially held up by the European Commission, the DMV Stainless venture became the second largest in the market, behind Sweden's Sandvik.

Vallourec's international drive continued into the second half of the 1990s, notably with the entry into the South American market and the construction of two factories in Brazil dedicated to the production of seamless tubes for the automotive industry. The company also entered China, forming the Changzhou Valinox Great Wall Welded Tube Co. Ltd. joint venture in 1996.

1997–2003

In 1997, Vallourec and Mannesmann joined together to form a new joint venture, Vallourec & Mannesman Tubes (V&M Tubes), which took over both companies' carbon and alloy steel seamless tube production. Owned at 55 percent by Vallourec, V&M Tubes boosted Vallourec's position with the worldwide oil and gas industry. As part of the joint venture, Mannesmann took over Usinor's 30 percent shareholding in Vallourec.

Following the merger, Vallourec reorganized its holdings into three primary businesses: V&M Tubes, Valtubes, and Sopretac. The company then sought out another strategic alliance, this time with Belgium's Timet, which operated a welded tubing division in Boulogne, France. In 1997, Vallourec agreed to merge its Valinox Welded Tubing division with the Timet division, forming Valtimet as a maker of specialty welded tubing products.

In 2000, V&M Tubes extended its international reach by acquiring Mannesmann's 76 percent share in its Mannesmann SA subsidiary in Brazil. V&M Tubes later boosted its share in the Brazil operation to nearly 100 percent.

Vallourec next targeted expansion in the United States. In 2002, the company took a major step forward in that market when it announced the acquisition, through V&M Tubes and in conjunction with long-term partner Sumitomo, of Japan, of the North Star Tubes subsidiary of Cargill. The acquisition, which gave V&M Tubes an 80 percent stake in North Star Tubes, was completed for a price of $380 million, and established V&M Tubes as one of the world's leading manufacturers of seamless tubes for the oil and gas industry. It also completed the shift in Vallourec's revenues, boosting the share of the United States to half of Vallourec's total sales.

At the beginning of 2003, Vallourec continued to boost its U.S. presence. In January of that year, the company announced its acquisition of International Tubular Products, a specialist manufacturer of stainless steel and titanium pipes and condensers for electricity generation. By then, Vallourec had boosted its revenues to more than EUR 2.5 billion, with a worldwide workforce of more than 17,000. Vallourec entered its second century as a leader in its specialty market.