Message from Michel David - Weill - Interview with Patrick Sayer

	Interview with Patrick Sayer Chairman of the Executive Board by Philippe Manière

Philippe Manière : 2009 was a terrible year for the economy and a particularly trying one for Eurazeo’s stock, which, in the spring, had lost up to 81% of its value off its historical highs. By the end of the year, half of that loss had been made up. Is everything back to the way it was before?

Patrick Sayer : After the bankruptcy of Lehman Brothers, the markets had lost all points of reference. In early 2009, Eurazeo’s stock was worth less than the aggregate value of just our listed investments and our cash, which implied that our unlisted investments had… a negative value! As of the second quarter, investors gradually returned to a more normal sense of perspective, and they understood the reality of our financial situation. Nonetheless, we cannot say “everything is back to the way it was before”: The economy is not emerging unscathed from this crisis, and it will take several years for us to see levels of business activity comparable to those seen in 2008.

P. M. : It’s true that your sector has been particularly affected by the crisis…

P. S. : Our “sector” is, above all, that of our subsidiaries, so mainly services and B2B distribution. But if you mean the capital investment business, it’s true that some investment funds have been experiencing real difficulties due to the partial or total retreat of many of their institutional backers. But Eurazeo is not an investment fund! We invest free of any maximum holding period constraints and, therefore, without the threat of being required to sell off holdings to comply with commitments to third parties. Actually, Eurazeo provides its shareholders with the best of both worlds. Although we apply the same disciplined principles as the investment funds with regard to the diversification of risk and the absence of debt within Eurazeo, the parent company, we enjoy true flexibility with regard to our investment horizon because, as a company, we have permanent capital. This is a fairly unique business model, which proved itself very resilient during the crisis.

P. M. : In addition to the qualities inherent to this model, what other steps did you take to try to spare Eurazeo from the turmoil of 2009?

P. S. : At a time when world economies were in a state of shock and the regulators themselves seemed to be disoriented, we tried above all, along with our Supervisory Board, to address the problems pragmatically. The main thing for Eurazeo, its shareholders and employees, and the tens of thousands of employees in the companies in which we’ve invested, was to collectively overcome the test of this veritable financial tsunami. To accomplish this, as of the first quarter of 2009 and investment by investment, we developed stress cases, that is to say worst-case scenarios. Paradoxically, that analysis largely reassured us all: the Supervisory Board, the Executive Board and all of the teams. It turned out that the financing we had put in place in our subsidiaries was solid and without recourse to the parent, and that Eurazeo had all the liquidity it needed to support its investments, if that had been necessary. We then naturally got right to work… to ensure that that would not be necessary! Three initiatives were resolutely implemented during 2009. First off, we reinforced Eurazeo’s liquidity by issuing bonds convertible into Danone shares. We then addressed the liquidity of the subsidiaries, for example, by restructuring and setting up bond financing for Rexel, reducing and diversifying Europcar’s debt, and renegotiating APCOA’s financing. Finally, we worked with all of our subsidiaries to lower their breakeven point and reduce their working capital needs in order to restore financial flexibility. Although carried out in response to the crisis, the enormous amount of work on the operations of our equity investments was a great investment in our future.

P. M. : You describe yourself as a patient and laborious investor. In the case of Accor, however, where you entered the capital alongside Colony and requested that it be split into two divisions, you gave the impression that you were seeking short-term gains...

P. S. : First of all, we did not acquire a stake in Accor by chance, but rather due to our great familiarity with the sector, as evidenced by the success of our investment in B&B: since becoming owners of this chain of budget hotels, the number of rooms has more than doubled and operating income has gone up 150%. Basically, there is no reason why the hotel business of Accor, the inventor of the budget hotel concept in Europe, cannot attain the same margins and the same dynamism as the best of them. Above all, that’s what motivates us! The split between the hotel and services activities - which in reality shared no synergies - seems appropriate to us for strictly operational reasons, and especially because it’s preferable that the managers of each of those two businesses devote 100% of their energy and resources to their own business’s development. See how far away we are from a one-off deal or a short-term approach! I would also like to point out that, under Accor’s new governance structure, the independent directors totally played their part in the decision to propose the split: the core shareholders, including Eurazeo, favored the split of course, but it was the independent directors who gave it its impetus.

P. M. : You’re rather satisfed with how 2009 turned out, even though you’re announcing a loss for the second year in a row…

P. S. : This is true, and it is obviously a disappointment - even if this loss is primarily attributable to the application of accounting standards that may, at times, be diffcult to grasp. But it’s mainly due to the impairment of intangibles related to the magnitude of the economic crisis in certain countries, for example, Europcar in Spain and APCOA in the U.K. that said, our shareholders know that the best performance measure for a company like ours is not net income, which fuctuates dramatically depending on whether or not we sell off investments, but rather changes in net asset values (NAV): that’s where one sees the results of our work to create value during the year. eurazeo’s NAV went up 20% in 2009, and it was still headed upward at the beginning of 2010, which is a source of serenity for our company. Basically, the losses we posted for 2009 refect the fact that we did not sell off any investment during the year. Clearly, this lack of movement was specifc to fiscal year 2009, and is not characteristic of our company! We therefore remain confident in our ability to create sustainable value for our shareholders.

P. M. : To be precise, that work is behind you and the stock market has already rewarded its achievement, as your share price tripled between March and December 2009... Does that not compromise your outlook for 2010?

P. S. : On the contrary, I’m optimistic about 2010, and for three basic reasons. the first is that the work that has just been completed on improving the operating performance and financial position of our investments is not yet, or is only to a very limited degree, refected in the figures. almost all of the costs were taken in 2009, but not all of the benefits realized then. We are now entering a perfectly symmetrical period... My belief is that investors will only gradually grasp the full extent of just how much our asset values will change. the second reason for optimism, in my eyes, is that the investment market has been partially cleaned up by the crisis. Historically, we know that it is during these years at the low end of the cycle, with less competition between players and fewer excesses in the offers, that the best deals are made. even if it can’t yet be seen, it’s likely that our future investments will be made on favorable terms. Most importantly, I believe that with governance based on a broad directorship, with open discussions and pertinent advice, eurazeo’s model is well suited to our role as a financial and industrial holding company, that is to say, a professional shareholder of our investments.

Overall, for me, 2010 will be the year of the recovery and perhaps one of great opportunities. It’s from that standpoint that we should be evaluated, on the basis of the Company’s potential rather than based solely on its immediate net asset value! I would also like to point out that an increasing number of analysts now have a forward-looking vision of eurazeo and our assets and value us, like most other companies, on the basis of our expected long-term value.

P. M. : Eurazeo has announced the appointment of a new member of the Executive Board, Fabrice de Gaudemar. Is this appointment indicative of a shift in Eurazeo’s strategy?

P. S. : The Supervisory Board has in fact appointed Fabrice de Gaudemar to the executive Board. We are all delighted that Fabrice is joining the executive Board, and personally, I am particularly pleased as we have worked together for more than 10 years.
In his new role, he will participate actively in the success of eurazeo especially working on a new avenue for development which will complement our current strategy, and which we call “eurazeo Croissance”. this new strategy will use our network, our expertise in financing and our ability to invest in several successive stages (unlike investment funds) to provide long-term support to companies with strong growth potential which also need capital. In this way, eurazeo will act as a professional and responsible shareholder in yet another manner, while expanding its range of investments.