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Koninklijke Vendex KBB N.V. (Royal Vendex KBB N.V.)

 


Address:
De Klencke 6
1083 HH Amsterdam
Netherlands

Telephone: 31 20 549 0500
Fax: 31 20 646 1954
http://www.vendexkbb.com

Statistics:
Public Company
Founded:1887
Sales:EURO 4.4 billion ($5.1 billion) (2003)
Employees: 43,900
Stock Exchanges:Amsterdam
Ticker Symbol:VDX
NAIC: 551120 Offices of Other Holding Companies; 452110 Department Stores


Company Perspectives:
The group aims at creating shareholder value, while at the same time pursuing an up-to-date social policy based on the commitment to the principals of corporate governance. This policy has both centralized and decentralized features, offering the opportunity to match social policy to the specific market situation of each trading format.


Key Dates:
1887: The first Vroom & Dreesmann retail store opens in downtown Amsterdam.
1973: The regional stores unite to form the Vroom & Dreesmann Group.
1978: The company begins international expansion as a result of changes in corporate tax structure.
1985: The firm changes its name to Vendex International N.V.
1998: Vendex spins off its food and temporary employment agency businesses.
1999: The company merges with Koninklijke Bijenkorf Beheer (KBB) to form Vendex KBB N.V.
2002: FAO Schwarz is sold.


Company History:

Koninklijke Vendex KBB N.V., or Royal Vendex KBB N.V., is the leading non-food retailer in the Netherlands. The Vendex empire is vast, with nearly 1,700 retail outlets operating under 15 different store formats. The company's holdings span the Netherlands, Belgium, Luxembourg, Denmark, Germany, France, and Spain. The firm's department stores include Bijenkorf, HEMA, and Vroom & Dreesmann. Its other business areas include do-it-yourself, fashion, and consumer electronics. Vendex underwent a series of changes during the late 1990s, spinning off its food and temporary employment agency businesses, and merging with competitor Koninklijke Bijenkorf Beheer (KBB) to gain its number one market position. The company adopted its current name in 2000.

Origins

The founders of the company that eventually became Vendex Willem Vroom and Anton Dreesmann, had extensive retail experience, having clerked in various food stores and dry goods stores for years. After the two young men met they formed a close friendship; ambitious and energetic, they decided to open a department store of their own. When the first Vroom & Dreesmann retail store opened in downtown Amsterdam in 1887, bundles of soap and candles, swatches of clothing material, and brooms were just some of the items sold by the new company to the general public.

From that date to the beginning of World War I, Vroom & Dreesmann department stores expanded throughout The Netherlands. Both of the founders came from close-knit families, and the two men were able to convince their relatives to operate each new store that was opened. The stores were typically co-owned by Vroom & Dreesmann and the chosen relative, but individually managed by the relative, who was given a great deal of autonomy. Vroom & Dreesmann relied heavily on the idea of familial responsibility to assure the success of each new store.

The world wars hurt the company not only in loss of revenue but also in loss of personnel to the tragedies of both conflicts. Yet Vroom & Dreesmann continued to grow. People still needed soap, shoes, and toilet paper, and Vroom & Dreesmann stores were there to provide these necessities, although without the direction of the founders, who had passed away some time before.

Throughout the 1950s and into the 1960s, Vroom & Dreesmann department stores operated within a highly decentralized corporate structure. During the early 1960s, the Vroom & Dreesmann group decided to impose some order on the company by organizing the stores by region, in a first step toward a more centralized and more efficient operational structure. In 1973 the regional groups merged to form a united Vroom & Dreesmann Group. Anton Dreesmann's grandson, who was also named Anton Dreesmann, became chairman of the newly restructured company.

With a Ph.D. in economics and law, and having taught as a professor at the University of Amsterdam, Anton Dreesmann was well prepared to assume the leadership of Vroom & Dreesmann. He immediately began to overhaul the organization and administration of the firm, implemented standardized operating procedures, and initiated a bold expansion strategy. Seeking to diversify from the traditional department store business, Dreesmann moved into the fields of food retail, fashion, banking, hardware retail, jewelry retail, maintenance services, mail order services, employment services, catering services, and electronic retail. The acquisitions of such well-known firms as Kreymborg, Claudia Strater, Edah, Staal Bankiers, Vedior, Vedelectric, Siebel, and Nederlands Talen Institut were financed mostly through debt.

International Expansion Begins in the Late 1970s

During the late 1970s, the government in The Netherlands revised the corporate tax structure as a means of financing social programs, and companies such as Vroom & Dreesmann were faced with a significant increase in their taxes. In response, Dreesmann began seeking overseas partners and acquisitions. He established a U.S. subsidiary, Vendamerica, to analyze trends in American retailing, and in 1978 he negotiated a major agreement with Dillard's department stores. According to the agreement, Vroom & Dreesmann paid approximately $24 million for more than one million non-voting shares of stock; in return, Dreesmann was made a member of Dillard's Board of Directors. In 1979 Dreesmann purchased Ultralar, a major Brazilian department store chain.

During the 1980s, Dreesmann continued to pursue an aggressive expansion strategy, although at a somewhat slower pace. In 1980 he attempted to acquire 50 percent of W.R. Grace's retailing operations. Grace, one of the largest conglomerates in the United States, was initially receptive to Dreesmann's overtures, but after months of intense negotiations, the two companies could not reach a mutually satisfactory agreement. During the same year, Dreesmann expanded into the Far East by purchasing a 3 percent interest in UNY, one of Japan's largest retailers, which operated numerous superstore and specialty store outlets. Other notable purchases during this time included a 50 percent stake in the Brazilian branch of the Sears department store chain and the acquisition of Perry Sports, one of the largest and most successful sports retail store chains in The Netherlands.

From 1982 through the remainder of the decade, the company focused on implementing a comprehensive reorganization plan. This involved organizing the company's businesses into separate operating divisions, with the retail trading division comprising food stores, department stores, specialty fashion, specialty hard goods, and specialty home furnishings, and the business services division comprising maintenance services, employment services, and miscellaneous services. The divisions were under the direction of the holding company, which changed its name to Vendex International N.V. in 1985. Throughout these changes, Anton Dreesmann remained firmly in control of the company, especially since the Dreesmann family retained a majority of the firm's stock.

Revenues and profitability continued to grow as a result of Dreesmann's expansion strategy. In 1987 Vendex acquired a 50 percent interest in B. Dalton, a huge bookstore chain in the United States, and a 32 percent stake in the College Book Stores of Barnes & Noble, another large American retail bookseller. Vendex also acquired numerous European companies in unrelated industries, including a Belgian furniture store chain and a Dutch travel agency.

Late 1980s-Early 1990s: Meeting Challenges

By the late 1980s, however, Vendex was experiencing serious financial problems. Having concentrated for years on its highly successful expansion strategy, the company failed to adapt to changes in the domestic market, especially in the retailing industry. This, combined with a slowdown in the Dutch economy, led to declining sales. The company's heavy debt load and high interests rates also contributed to significant losses in certain sectors of its business. Compounding these problems was the poor health of Dreesmann, who suffered a series of debilitating strokes.

In 1988 Dreesmann appointed Arie Van der Zwan to take his place as chairman of Vendex. Van der Zwan, also an economics professor, began to improve the company's operational efficiency by taking drastic measures, which included layoffs of almost 18 percent of the company's retail employees. Dreesmann was furious. Highly regarded for his employee relations policies--and called "Uncle Anton" by his workers--Dreesmann returned to Vendex despite his failing health. He immediately fired Van der Zwan, and implemented his own reorganization and revitalization strategy.

In 1990 Dreesmann selected Jan Michiel Hessels to succeed him as chairman of Vendex. Hessels had obtained a law degree from the University of Leiden and had extensive administrative experience in companies such as Akzo, Delimaatschappij, and Deli Universal. Hessels' assignment was to revitalize the company through a three-pronged strategy: divest unprofitable, non-core businesses; restructure the retail department store division by concentrating on improved profitability and domestic acquisitions; and reduce corporate debt.

In 1990 Vendex discontinued almost all of its operations in Brazil, including its retail department store operations, banking operations, and hard goods retail operation, primarily due to declining profits and the instability of the Brazilian economy. The company also disposed of some holdings in banking, mail order services, and real estate operations within The Netherlands and reduced its interest in Barnes & Noble, the U.S. bookstore chain. In 1991, after its American home center retail store chain, Mr. Goodbuys, filed for Chapter 11 bankruptcy, Vendex ceased all operations of the company. Vendex sold its shares in Dillard's department stores, reaping a healthy profit from its investment, and reduced its share in Software, Etc., another American investment.

Hessels' strategic moves paid off handsomely. Vendex International's total income increased from NLG 164 million in 1990 to more than NLG 340 million in 1995. Part of this improvement resulted from an increase in profits reported by Vroom & Dreesmann department stores, which shot up from NLG 7 million in 1990 to NLG 86 million in 1995, and by an improvement in the company's debt-to-equity ratio, which decreased from 234 percent at the end of 1991 to just 48.4 percent in 1995.

In 1995 Vendex reported that approximately 72 percent of net sales and nearly 75 percent of its operating income came from its retail division, while the remainder was derived from the business services division. The company operated a total of 655 food stores and 121 franchise pet food retail stores, and had more than 11 percent of the total food retail market in The Netherlands. Edah, the company's largest retail food store chain, which operated medium-sized supermarkets, was listed as the third-largest food retail store in the country in 1995.

Vendex International's department store operation was led by Vroom & Dreesmann, which had a 40 percent share of the total department store market in The Netherlands. With 62 stores across the country, Vroom & Dreesmann department stores sold a wide variety of merchandise, including clothing, toys, and telecommunications equipment. The company's specialty store operations were equally diverse, with product lines including lingerie, camping accessories, jewelry, and home furnishings. Companies within the Vendex specialty retail family included such well-known names as Kreymborg, Kien, America Today, Perry Sport, the Siebel Group, and Kijkshop/Best-Sellers.

Vendex's business services operation was led by Cemsto, the largest cleaning service firm in the country, which had more than 11,000 employees. Most of Cemsto's cleaning services were contracted by large buildings, housing corporations, and other business enterprises. Vendex's Employment services sector operated 474 offices throughout The Netherlands, Belgium, Luxembourg, France, and Germany. Vedior International, which provided employment services such as helping people find temporary jobs or training the long-term unemployed to find work, was considered one of the most innovative firms in the field. With Hessels firmly in control, Vendex International's future looked bright. The company continued to grow within a small geographical area by adapting to the changing conditions of the European marketplace.

Late 1990s and Beyond

The European retail industry did in fact experience change, which brought about significant restructuring during the late 1990s. Modifications in business-related laws allowed large conglomerates like Vendex to spin off certain holdings. The company took advantage of the relaxed regulations and began to position itself as the leading Dutch nonfood retailer. In 1998, the firm spun off Vedior to Vendex shareholders. It then merged its food interests with De Boer Unigro to create supermarket giant Laurus. Having shed its business and food holdings, the company was left to focus on its department store and retail activities.

To this end, Vendex made a play for competitor Koninklijke Bijenkorf Beheer (KBB) in early 1998. The deal would unite the leading department store chains in the Netherlands under single ownership, creating the leading nonfood retailer in the country. The complicated merger process faced scrutiny not only by regulators, but shareholders as well that felt Vendex's bid for KBB was too low. A hostile battle ensued when a counter-offer was made by privately-held WE International--a move not often seen in the Dutch business arena. By October, Vendex had increased its offer price to thwart WE's attempts. Vendex eventually won out, completing the merger process in 1999.

The new Vendex KBB controlled 11 percent of the Dutch market, leaving room for further expansion. According to competition laws, a company was limited to a 20 percent market share which meant Vendex KBB could bolster its holdings. It did just that by acquiring electronics retailer It's in 2000. It added do-it-yourself retailer Brico to its arsenal in 2002 in a deal worth US$440.8 million. As part of its strategy to focus on its core businesses, Vendex sold its financially troubled FAO Schwarz toy stores in 2002.

While Vendex appeared to be well positioned to compete in the nonfood retailing sector, it began to face a host of challenges in the early years of the new millennium. Market conditions were less than stellar with consumer confidence falling to its lowest levels since 1983. Flat consumer spending, price wars, and heightened competition left Vendex's major department store operations--Vroom & Dreesmann and de Bijenkorf--struggling to shore up profits. By 2003, company shareholders were demanding changes and recommended that management either take Vendex private or break up the company. Vendex chairman Ed Hamming recognized the severity of the situation, claiming in a September 2003 Financial Times article, "If we do not quickly put our house in order our credibility will suffer." Sure enough, rumors began to circulate about a possible takeover of Vendex KBB as earnings continued to falter in early 2004. At this time the company reported that it would consider offers made by certain parties that were interested in the company as whole and that would maintain its corporate strategy. Vendex's future was indeed up in the air, leaving it subject to speculation about its success in the years to come.

Principal Subsidiaries: Vroom & Dreesmann; Claudia Straeter; Hunkemoeller; Dixons; Hema; de Bijenkorf; It's; Modern Electronics; Prijstopper; Dynabyte; Scaap & Citroen; M&S Mode; Praxis; Formido; Brico.

Principal Competitors: AVA AG; Metro AG; Otto Versand Gmbh & Co.





Further Reading:


  • Bradley, Sandrine, "Vendex Becomes Benelux Player," Acquisitions Monthly, May 2002, p. 44.

  • Cramb, Gordon, "Merger Mania Takes Hold," Financial Times, November 5, 1998, p. 3.

  • ------, "Vendex and DBU in Foods Merger," Financial Times, May 26, 1998, p. 29.

  • ------, "Vendex and KBB Act to Secure Merger," Financial Times, October 6, 1998, p. 34.

  • ------, "Vendex Spins Off Recruitment Arm," Financial Times, June 25, 1998, p. 28.

  • "CVC Emerges as a Possible Bidder for Vendex KBB," Financial Times, February 7, 2004, p. 9.

  • "Losses Force Vendex KBB to Seek Help," Financial Times, September 10, 2003, p. 18.

  • Miller, Paul, "FAO Acquisition Rounds Out Right Start," Catalog Age, January 2002.

  • "Shoppers Circle KBB in Dutch Retail Takeover Battle," Financial Times, October 5, 1998, p. 28.

  • Smit, Barbara, "Vendex Bids to Take Over Rival KBB," Financial Times, February 10, 1998, p. 30.

  • "Vendex International NV," Wall Street Journal, April 8, 1998.

  • "VendexKBB Says 'Well Positioned' for European Non-food Sector Consolidation," AFX News, September 7, 1999.

Source: International Directory of Company Histories, Vol.62. St. James Press, 2004.




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