Hema back in Dutch hands, thanks to Marcel Boekhoorn

Edition 28 December 2018, by Jeroen Spangenberg

Marcel Boekhoorn, a Dutch billionaire, who became rich by the sale of telecom provider Telfort, announced in October that he intended to buy Hema from its British owners, investment company Lion Capital. At the end of November the take-over was completed. Hema is a chain of department stores with almost 800 stores in nine countries on two continents, providing 19,000 jobs. A main issue for Hema in recent years has been the confl ict between the managing board and the franchisers. About half of Hema’s 541 stores in the Netherlands are run by franchisers, and they have been locked in a long-term dispute with management about the division of costs and benefi ts from online sales.

Marcel Boekhoorn has reached new agreements with the franchisers and has cancelled the ongoing lawsuits against owners of small Hema franchises. One of the new agreements includes a change in how the franchise buys its products. Additionally, the policy regarding investment and profi t of online sales was changed. The VAB, the organization that represents the interest of the franchise holders, is satisfi ed with the new agreements.

The British investment fund Lion Capital bought Hema in 2007 for 1.1 billion euro, with the intention of increasing the profi tability of the chain and to sell it with a profi t. However, Hema has been making losses in the decade. Marcel Boekhoorn has reduced the outstanding debt of 750 million euro by 100 million and another 40 million through his investment fund. Nevertheless, an outstanding debt can be fi scally attractive. In order to increase the cash fl ow, Boekhoorn is planning to sell a number of stores to franchise holders. Additionally, half of the managing board will be replaced. Moreover, Boekhoorn wants to sell the bakery part of Hema.

Since 2010, Lion Capital has been trying to sell Hema. Dutch trade union FNV announced at the time that employees were suffering from an intense workload. In 2011 Lion Capital tried to sell Hema to Ahold, but this deal didn’t go through. In 2013 the focus shifted to renewing the beauty and fashion section, since growth could be realized in that area. In that year, the company made a loss of 16.4 million euro. This was due mostly to a decreasing number of visitors to stores in the inner cities, low consumer trust and a lack of structural recovery in the housing market, according to Ronald van Zetten, CEO at the time. In 2014 the focus was shifted to refi nancing the debts. The parent company received 10 percent interest on its outstanding debt from Hema. However, Lion Capital had to inject 220 million in capital in 2014, after Hema made a record loss of 189 million in that year following a reorganization. The take-over sum of Lion Capital was put on the balance sheet of Hema, which meant that the company had to pay high interest for many years.

In 2014 several new stores were opened in France and Spain and plans were made to expand to the United Kingdom. The stores were reorganized to better satisfy the needs of customers. Additionally, Hema introduced 600 new products. In 2014 Tjeerd Jegen took over as CEO. CEO Van Zetten was criticized internally, since he lacked retail experience. After Van Zetten left the company, it was still underperforming and making losses. Therefore, CFO Ad Walter also had to leave the company after six years. Jegen, the new CEO, wanted to quit competing for fashion sales with stores such as H&M and Zara. He also reduced the number of products that Hema sold, almost 25,000 in 2015. Furthermore, he introduced a discount corner in the stores. The overall loss was halved to 72,5 million in 2015 and the turn-over increased by 5.8 percent. The international expansion planned by Van Zetten turned out to be successful. International expansion, especially into the Benelux, and online sales became a central focus. In 2016 Hema had a turn-over of 1.2 billion euro, mostly due to an increase in turnover in the Netherlands of 3.7 percent. The overall loss was reduced to 26.2 million euro in 2016.

In 2017 Lion Capital tried to sell the company again. At the time, the focus lay on creating a nice atmosphere in the stores and changing the furniture and decoration departments; pilots were started with new food concepts. In the third quarter of 2017 the company made a profi t for the fi rst time in fi ve years. In 2018 a Belgian investment company was interested in buying Hema, but pulled out when it became clear that negotiations between Hema and the franchise holders led nowhere. Then, in October 2018, Marcel Boekhoorn announced in a press statement that he wanted to buy Hema through his investment company Ramphastos. At the end of November, the deal was concluded and Boekhoorn took over the company. Marcel Boekhoorn is a very successful entrepreneur, who increased Telfort’s profits from 50 million to 150 million in just eight months, earning half a billion euro. Currently, he has invested in the oil and gas sector in Tunisia and Romania through Mazarine Energy. The Carlyle Group and Royal Dutch Shell also invest in Mazarine Energy. Boekhoorn also owns Ouwehands Dierenpark, a zoo that offers a home to pandas from China. The Chinese president Xi Jinping and King Willem-Alexander attended the welcome ceremony for the two pandas. Boekhoorn is listed in the Quote 500 list of richest people in the Netherlands.

His new investment in Hema is promising for the company. Boekhoorn has already solved current disputes and decreased the debt. Furthermore, he is planning to increase the reputation of the brand. Hema was founded in 1929 and decades later still had the reputation of selling cheap and low-quality products, but in the last decade the look of the stores has improved and it is very likely that Boekhoorn will introduce further improvements. The trade union and the franchise owners are very satisfi ed with their new investor.