Lagardère Travel Retail has described the recent €250m ($277m) acquisition of Belgian travel retailer International Duty Free (IDF) as a ‘very good and important move’ for the company.

As reported, the company announced an agreement last week to purchase IDF, which is the world’s second oldest duty free operator after Aer Rianta International. The latter opened the first ever duty free shop at Shannon Airport in 1947.

IDF is a wholly-owned subsidiary of Compagnie Nationale à Portefeuille and owned by the Frère Group which was led by late Belgian businessman Albert Frère.

The leading Belgian retailer, which celebrated its 60^th anniversary in 2018, operates more than 30 stores, including 25 duty free, fashion and confectionery points of sale at Brussels Airport.

EMPHASIS ON CHOCOLATE

It also runs two duty free stores at Charleroi Airport and premium chocolate stores under The Belgian Chocolate House branding at Brussels South Station and at downtown locations in Antwerp and Luxembourg.

The completion of the transaction, which is subject to a number of customary conditions, including regulatory approval is scheduled for Q4 2019. It is expected to propel annual Lagardère Travel Retail revenue to €5.3bn.

Under the terms of the agreement IDF will become Lagardere Travel Retail Belgium and continue to be led by CEO Nicolas Van Brandt.

Dag Rasmussen, Chairman and CEO of Lagardère Travel Retail told TRBusiness: “I am very satisfied about the whole acquisition. I have known the company many years and know Nicolas and the shareholders for a long while. It is a company which is very well run, optimised and intent on looking at every possible way to work the business.”

He added: “We are impressed by the way they work. Aside the quality of the relationship they have with the airport which is extremely important to us, it is a very positive environment.”

IDF fits seamlessly into Lagardère’s four strategic pillars, which are operational excellence, partner of choice, profitable growth and agile and efficient organisation.

Rasmussen said: “IDF has really managed to optimise the business and is a very efficient organisation. It is entrepreneurial with lots of ideas and tests ideas and changes its mind if something doesn’t work. It is very close to the spirit we have.”

Reflecting on how the acquisition came about and has progressed to the point it is now, Rasmussen explained: “It started with the relationship with Nicolas and the shareholders and concluded with them both who I have known for a while.

“The process started less than two-and-a-half months ago and was very quick. We all agreed that we wanted to do something quickly, but needed to determine whether this would be viable. Fortunately it was.”

Initially, it was all about building a relationship, which has developed over time. “We considered ourselves colleagues rather than competitors. Obviously, we have never exchanged secrets, but we have exchanged ideas and often thought about what we could do together. We have both been inspired by each other’s achievements.”

NEW ERA

The passing last year of Albert Frère means a new era is being built by children and grandchildren. “There will most probably be a strategic rethink and some strategic opportunities,” Rasmussen acknowledged.

He continued: “IDF is a great company and my aim is to keep the pros and fight against the cons. Among the pros is that it is an organisation with lots of initiatives and empowerment. We will keep this empowerment and give Nicolas support on purchasing and information technology, while listening to his own ideas.”

Van Brandt, who joined the company more than 11 years ago looks set to lead the purchasing of local Belgian chocolates under the new regime and help grow Lagardère Travel in Belgium and overseas. The buying of international products will be handled centrally.

“When making an acquisition we always prefer to work with existing management team members, providing they can do an excellent job. This is exactly what happened when we merged with Paradies which is run by Gregg Paradies.

“In this instance, it is not only about the personal relationship with Nicolas, but the fact he is great at what he does and will fit into our culture. He has already met the team in Paris and there is a good understanding which is very important.”

The Lagardère team will also draw on the experience and know-how of Van Brandt when it comes to pursuing business development opportunities.

“Proximity is one of our values and will be maintained once the acquisition goes through. We will be using Nicolas and his strengths to develop at home and abroad in line with our ambitious development plan.”

Lagardère will also look to capitalise on various growth opportunities, some of which were identified during a recent Brussels airport visit to see the stores. These opportunities revolve around sense of place and impulse, explained Rasmussen: “There are some things we have done recently which have worked well and we plan to implement these with Nicolas in Brussels and Charleroi.

“There are things we can develop around sense of place, which we have worked a lot on with great results. This is probably something we will try to push.”

He continued: “We will also try to do something around impulse, but generally, it is simply about testing some ideas in Brussels which have worked well elsewhere.”

FOCUS ON CHOCOLATE

On the flip side, a strong focus on chocolate is among the many elements IDF can bring to the Lagardère Travel Retail portfolio. Brussels Airport is understood to sell more than 800 tonnes of chocolate per year, around two tonnes a day. This equates to an average of 1.4kg per minute.

Rasmussen commented: “Chocolate is a significant part of their business and we believe we can replicate certain ideas. It won’t be a pure copy and paste though because Belgian chocolate is easier to offer in somewhere like Brussels, for example, than it will be in some of our other locations.”

In terms of day-to-day operations at Brussels and Charleroi Airports, the core international duty free shops will become Aelia Duty Free outlets. “That is our plan. We must check with the airport to ensure this is possible, but if we can rename the outlets, it will enable us to have a more consistent commercial and marketing approach.”

In the short-term, closing the acquisition and ensuring a smooth integration is the main priority. “The top priority is obviously integration. I expect this to be smooth as there will not be too many changes,” Rasmussen emphasised.

Once the agreement is finalised, Rasmussen can look forward to doing business in Belgium, a country he knows very well. “I have worked there for many years and it is also a place where the company has been a retailer and distributor in the past.

“We are happy to return here with International Duty Free. It is a country we know fairly well and I think there are other growth areas we can work on around concepts such as food and other segments.”

Having completed various high-profile acquisitions over the years, including North American travel retailer Paradies in 2015 and more recently Hojeij Branded Foods and its Vino Volo wine bar and retail subsidiary, could further acquisitions be on the agenda?

GROWTH PILLARS

“One of our growth pillars is tenders in countries we are not present and acquisitions. Both elements are important parts of our growth strategy, but not the only ones.”

Moving forward, Lagardère will remain mindful of the history of IDF and indeed any other company it might acquire in the future. Rasmussen said: “We consider our birthday as 1852, the year we opened the first railway bookstore, so we have a long history consistent with IDF’s.”

“Paradies also had a long history, having opened its first store in 1960. We respect the history of both companies and the people who are part of them. It is something we do very naturally.”

The announcement of the IDF acquisition actually came as Lagardère Travel Retail revealed its H1 2019 results. Following a positive first half of the year, Rasmussen is expecting a more tempered result in H2. “We are happy with performance in the first half. It was hard work which paid off.

I am not expecting such high figures for the second half of the year, but it still promises to be very dynamic.”