Compagnie des Alpes

6, Place Abel Gance
92100 Boulogne-Billancourt
France
Telephone: ( + 33) 1-46-94-44-49
Fax: ( + 33)1-46-94-46-99
Web site: http://www.compagniedesalpes.com

Public Company
Incorporated: 1989
Employees: 1,399
Sales: EUR 220.99 million ($189.4 million)
Stock Exchanges: Euronext Paris
Ticker Symbol: CDA
NAIC: 713920 Skiing Facilities

Compagnie des Alpes is the world’s leading ski lift operator, a specialty which includes not only the construction and operation of ski lifts but also the maintenance—and generation of snow—of ski areas under the company’s control. Compagnie des Alpes recorded over 13 million “skier days” and 135 skier passages in the 2000-2001 season. Long considered a subsidiary of the French government’s Caisse des Dépôts (C3D), which continues to hold 44 percent of its stock, CDA concentrates its operation and management of ski areas on larger, high-altitude resort areas. The higher-altitude locations guarantee the company greater snow cover and operations spanning the full four-month European ski season. CDA already holds a 25 percent share of the French ski market, the world’s largest, including sites at Les Arcs, Tignes, Meribel, Chamonix, and other prestigious resort areas. CDA has also begun to explore geographic expansion, notably in Switzerland and Italy. The company has also entered a cooperation agreement with Canada’s Intrawest, including an exchange of shares, designed to help CDA enter the North American ski market. At the same time, the company has begun to diversify, moving into the operation of a chain of boutiques, Le Ski Shop, offering sales and rentals of ski and related clothing and equipment. The company has also begun land development activities, building up a portfolio of more than 150,000 square meters of building rights in the Les Arcs, Les Menuires, La Plagne, and Flaine resort areas. Nonetheless, ski lift ticket sales remain the primary source of CDA’s revenues, at more than 90 percent of the company’s EUR 221 million in sales in 2000-2001. Led by chairman and CEO Jean-Pierre Sonois, the company expects to break the EUR 300 million mark by 2005.

Lifting the Ski Lift Industry in the 1990s

The French ski industry boomed in the second half of the 20th century as skiing became one of the country’s most popular sports. The development of the country’s vast, ski-able region in the Alpes and elsewhere saw the creation of a large number of resorts and resort communities. If ski resorts in Austria and Switzerland, and in Italy as well, had become primary destinations for the international skiing community, France’s slopes typically attracted primarily French skiers. French slopes were considered a public treasure and remained under control of their local municipalities.

The growing numbers of ski slopes and resorts, building international competition (with the North American ski industry convincing growing numbers of skiers to holiday closer to home), and domestic competition from resorts in the Pyrenees mountains on the border between France and Spain forced communities in the Alpes ski region to make continuous improvements to their ski trails and equipment, especially ski lifts and snowmaking equipment. While ski lifts were necessary for getting the growing number of skiers up to the top of slopes, snowmaking equipment became increasingly necessary to guarantee sufficient coverage. Both presented enormous and constant investment costs that proved too onerous for most communities to bear alone. Communities were also responsible for repairing slopes damaged by avalanches and weather conditions.

Over time, a number of communities turned to the government-owned Caisse des Dépôts et Consignations for help in meeting the heavy investment costs needed to maintain the quality of their slopes and infrastructure, including ski lifts. C3D soon built up a portfolio of mountain resorts under its guidance. Among these was Les Arcs, which had been placed under the direction of Jean-Pierre Sonois in the late 1970s.

During the 1980s, the spiraling costs of maintaining the integrity of their slopes and equipment were bringing communities under increasing financial pressure. Toward the end of the decade, Sonois proposed grouping a number of ski resorts into a single network. Such a network would be able to cut costs. With the failing economy at the end of the 1980s, a number of communities were eager to turn over the operations of their ski lifts and slopes to a third party.

In 1989, Caisse des Dépôts et Consignations, through its investment wing Caisse des Dépôts—Développement (C3D), agreed to take over operations in a number of the region’s most prominent ski areas. In that year, C3D created a new publicly-operated subsidiary, Compagnie des Alpes, which was given as a charter to act as a specialist in ski area management, with a focus on the more profitable high-altitude areas. Sonois was placed at the head of the new company as chairman and CEO. C3D remained the company’s primary shareholder.

CDA quickly built up its network of ski areas and by 1991 had built up a strong position in the sector. The company took an initial share in SATAL (Société pour l’ Aménagement Touristique Argentiere Lognan), giving it access to that company’s operations in the Grand Montets resort area in the Chamonix Valley. CDA gained majority control of SATAL soon after. The company also moved into Tignes, taking over STGM (Société d’exploitation des Téléphériques de la Grande Motte). CDA also negotiated the concessions for several other communities, forming separate subsidiaries for these operations, such as of STAG (Société d’exploitation des Téléphériques de l’Aiguille Grive), placing the company in the Peisey-Nancroix/Vallandry ski area, and SEVABEL (Société d’Exploitation de la Vallee des Belleville), which took over the ski lift and slope maintenance operation of the Les Menuires and Saint-Martin-de-Belleville ski resort areas.

For ski communities hard hit by the slump in the French ski industry at the beginning of the 1990s, the arrival of CDA offered a way out of the continual and expensive investments needed to maintain their slopes and equipment. CDA was able to continue its rapid growth into the mid-1990s. After taking majority control of SATAL, the company moved into the La Plagne ski region through a majority shareholding position in SAP. The acquisition of STAR strengthened CDA’s position in Les Arcs.

In 1995, CDA made one of its largest acquisitions to date, buying up nearly all of the shares in CIEL (Centre Investissements et Loisirs), which held a 36 percent stake in Meribel Alpina. That company held the concessions for the Meribel ski slopes in the Allues valley region, one of France’s most prestigious ski ranges. The following year, CDA’s acquisition of SMA (Société les Montagnes de l’Arc) gave it full control of STAR and the Les Arcs concession. In 1997, the company, through its position in Meribel Alpina, entered four more communities—Flaine, Samoëns, Morillon and Sixt—when Meribel Alpina acquired Grand Massif Développement, concentrated on the Haute Savoie region. CDA was meanwhile building up its own position with Meribel Alpina. By 1998, CDA held some 43 percent of Meribel Alpina’s shares.

International Growth and Diversification for the New Century

CDA had grown rapidly during the early 1990s and by mid-decade had taken control of more than 20 percent of the French market. The company’s concentration on only high-altitude, high-prestige locations gave it a dominant position among the market’s most active ski areas. Yet the CDA was finding domestic growth more and more difficult to come by and the region began to balk at the appearance of a dominant—and even monopolistic—player in the sector. CDA, at the same time, was leery of remaining a single- product, single-market company.

In the late 1990s, Sonois led the company in a new strategy designed to diversify the company both geographically and into other business areas. The acquisition of STAR had given the company a number of boutiques. CDA decided to build on this opportunity, launching its chain of Le Ski Shop stores, which offered sales and rentals of ski and related clothing and equipment. CDA also moved into property development, putting together up a portfolio of building rights for properties in its ski resort areas.

Geographically, CDA looked both toward its neighbors and overseas for growth. In 1996, the company made its first foreign acquisition, taking over ski lift operator CMBF (Courmayeur Mont-Blanc Funivie SpA) in conjunction with the Val d’Oste regional authority. The acquisition gave CDA an important foothold in the as yet highly fragmented Italian market.

Company Perspectives:

Our Commitment: Continue to follow the same strategic path which has made the Compagnie des Alpes the world’s leader in ski area management, especially: maintain sustained growth for the Group, both in terms of activity and earnings, and thereby create value for our shareholders; stimulate the Group’s organization by enhancing its industrial dimension and capitalizing on synergies and by introducing operating standards and reducing costs, especially purchasing costs; improve our financial communications, especially by strengthening our operations aimed at individual shareholders.

Our Goal For 2005: to break the EUR 320 million sales barrier. This represents average annual growth of at least ten percent for the Group. Half of this growth will be organic and the other half external.

CDA’s next stop was North America. In 1998, the company signed a cooperation agreement with Intrawest, based in Canada, the leading North American ski resorts property developer and operator. The agreement, which included a shares swap that made Intrawest CDA’s second-largest shareholder after C3D, was expected to enable CDA to enter the North American market with an eye on entering the Vail and Aspen ski areas. At the same time, Intrawest was able to begin preparations to begin property developments in France, notably through acquisitions of parts of CDA’s building rights portfolio.

In 2000, CDA stepped up its shareholding position in Meribel Alpina to 90 percent. In exchange for approval of the transaction by the mergers and monopolies commission, CDA had to agree not to seek further expansion in the French Alps. The acquisition also removed Meribel from its over-the-counter (OTC) listing on the Paris stock exchange.

That year, CDA turned its expansion interest to Switzerland. In 2000, the company acquired a nearly 22 percent stake in Télé-Verbier, which provided ski lift operations in the vast Quatre Vallées area. Although somewhat contested by Swiss protectionists, that CDA acquisition was soon followed by a new move into Switzerland. In February 2001, CDA acquired a 35 percent share of Saas-Fee Bergbahnen, giving it a foothold in the canton of Valais.

As CDA continued to look for new acquisition opportunities—including in the remaining major European ski destination, Austria—the company began to see the first fruits of its partnership with Intrawest. In December 2001, the company agreed to sell its partner a nine hectare area in Les Arcs as the site for Intrawest’s proposed new ski village development. In exchange, CDA was given the concession for constructing and building the new ski lifts needed for the site as well as space for the opening of a Le Ski Shop boutique. Under Sonois’ guidance, CDA had grown to become the world’s leading ski lift operator in just ten years. The company’s commitment to new acquisitions, and its target of revenues of more than EUR 300 million by 2005, gave it confidence that it would continue to occupy the summits of its industry in the new century.

Principal Subsidiaries

CMBF (57.12%; Italy); FDA (51.00%; Italy); STGM (77.72%); SATAL (80.53%); STAG (99.99%); SAP (84.45%); SEVABEL (81.62%); SCIVABEL (99.94%); CIEL (99.98%);SMA (96.01%); SKI SHOP (99.98%); MERIBEL-ALPINA (90.00%); GMD (80.95%); DSF (ex SEPAD) (99.99%); SERM (99.86%); LRMS (99.96%); SIXT DEVELOPPEMENT (99.80%); SAG (99.99%); TELEVER-BIER (21.80%; Switzerland).

Principal Competitors

Intrawest Inc.; Titlisbahnen-Bergbahnen Engelberg-Trubse AG; Rothornbahn und Scalottas AG; Skistar AB.

Key Dates:

1989:

C3D, an investment arm of the government-run Caisse des Dépôts et Consignations, launches Compagnie des Alpes to group its portfolio of ski resorts operations.

1991:

CDA’s portfolio expands to include the acquisition of a stake in SATAL and majority control of STGM, as well as the launch of STAG and SEVABEL.

1994:

CDA takes a majority stake in SATAL as well as in SAP and STAR.

1996:

CDA moves into Italy with a majority shareholding in Courmayeur Mont-Blanc Funivie SpA.

1998:

CDA signs a cooperation agreement with Canada’s Intrawest.

2000:

CDA purchases 90 percent of Meribel Alpina and a 22 percent share of Télé-Verbier, marking company’s first move into Switzerland.

2001:

CDA acquires 35 percent of Saas-Fee Bergbahnen to expand company’s operations in Switzerland.

Further Reading

Sullivan, Aline, “For Investors Unafraid of Heights, Ski-Resort Stocks Provide a Way to Plunge,” International Herald Tribune, December 6, 1997

Elliott, Robert, “French Ski Stocks to Carve Gains from Travel Slump,” Reuters, December 11, 2001.

Couvelaire, Anne-Louise, “Compagnie des Alpes: le canon de la neige,” Nouvel Observateur, December 2000.

Marquetty, Fabio, “Trois questions à Jean-Pierre Sonois, Président du directoire de la Compagnie des Alpes,” Le Journal Des Finances, December 1, 2001, p. 18.

Chevallard, Lucile, “La Compagnie des Alpes cherche à augmenter le nombre de ses clients,” Les Echos, September 13, 2001 p. 32.

Dupuy, Héléna, “Ces entreprises qui managent aux sommets,” La Tribune, February 21, 2001.

—M.L. Cohen