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Fait_HN_2016_V době růstu se nemocné firmy kupují hůř

Hospodářské noviny
3 October 2017
Luboš Kreč

The Jet Investment financial group owned by the Brno billionaire and philanthropist Igor Fait celebrated its 20th anniversary this September. Its leader prefers, however, to look to the future – to opening new funds or making money on carbon. At the same time, he hopes the Czech Republic does not lose its pro-western orientation.

Igor Fait has a very good reputation among Czech industrialists. Therefore, when he and his Jet Investment group opened the first investment fund more than two years ago, potential investors were queuing up. In the end, he assembled more than CZK 3 billion from Czech businesspeople, and, among other investments, a few days ago he bought Benet Automotive, a well-known automotive components factory based in Mladá Boleslav.

Now, Mr Fait and his colleagues are preparing a second fund for which he would like to raise as much as CZK 5 billion. His approach remains the same: looking for companies that are not in the best of shape and investing into them. This is the manner in which Hutní montáže and Vinium have been handled under his stewardship in the past. His current portfolio includes Kordárna Plus and Strojírny Poldi. Last year, he and his team made an exception and bought a start-up, Payment4U, a company producing payment machines, for example for the online retailer Mall.cz. Jet Investment’s total of nine companies in the Czech Republic, Slovakia, Poland, and Germany employ around 2,600 people and their annual turnover exceeds CZK 6 billion.

HN: The economy is chugging along, we have low unemployment, and GDP is growing. How does this specifically affect your group?
I would say that not all segments are booming, because it’s mainly the automotive industry that is growing at an unprecedented rate. But the energy sector is going through a tough period. We have a diversified portfolio, and, on the one hand, we are in industries that are going through good times whereas, on the other hand, we are in those which are not faring very well right now. And of course, it’s generally known that there is strong pressure on wages and that there are not enough people. We are currently short about 120 people within the group, and that’s a negative aspect.

HN: Where is it the worst? At the railcar factory in Studénka?
Things have gotten better at MSV Metal Studénka since they took on some former employees from OKD. The worst situation is at Kordárna Plus, which is short by 60 people. Strojírny Poldi is also in a tough spot.

HN: And how is the upturn affecting someone buying sick companies? Are their prices inflated?
Companies are always expensive when the economy is doing well. The question is for how long is it going to be doing well? Once that changes, we will of course have much better opportunities. So, from this perspective, just now is not an optimal time for our group. Nevertheless, we have managed some acquisitions, but these are acquisitions where we can count on synergistic effects. In that case, we can afford to pay a slightly higher price and the synergies will pay us back.

HN: You have had quite a lot going on over the past year and a half. In Germany the carbon fabric manufacturer Fiberpreg, a metallurgy company in Poland, and the supplier of energy units BronswerkHeat Transfer…
And we have just now signed on Benet Automotive. This is the largest investment in recent months. We’ve been negotiating on that for half a year.

HN: How did this come about?
We were looking for a company to link up with Fiberpreg, one which could use its carbon fabric, so-called prepreg. We had not just automotive companies in our sights but also aviation suppliers. We approached about eight companies, but we liked Benet the most. They had a turnover last year of CZK 820 million and the plan for this year is a billion.

HN: Is ŠKODA an important client for Benet, as they are both based in Mladá Boleslav?
They have several segments that make up their sales. The carbon components that they make for BMW and Audi are not currently used by ŠKODA. They make plastic parts for Audi and for ŠKODA. And then they do styling of ŠKODA cars – when you want something extra, they take the classic parts off and fit the car with better ones. They are launching this styling, too, in Ingolstadt for Audi. They also have a prototype division and are co‑operating with ŠKODA.

HN: Have you got any other investments in your sights?
We don’t have too much more money to work with in our Jet 1 Fund; we have about CZK 600 million left. We are working on two things that could be completed before the end of the year. One is in the Czech Republic, one in Germany. I would just add that even though Benet is in the automotive industry we want to direct its production also to other areas – to recreational activities, sports, and the aviation industry.

HN: What can you make out of carbon in sports?
Already plenty of things today, but mainly boats. There is also a company here in Brno which makes motorised surfboards. Carbon is used in golf equipment, bikes… We believe very strongly in this material.

HN: You have said that you focus on traditional industry and that IT is not for you, but yet you bought Payment4U, which makes payment machines. Isn’t this rather a step outside your area?
It’s true that this was sort of an experiment for us. Their payment machines are most visible when you go to pick up goods at a Mall.cz or CZC.cz pick-up point and there are these boxes where you pay. Those are from Payment4U. You can pay by card or in cash, you get a little ticket and then go pick up your goods. This area is developing like never seen before, but I can see potential also in municipal administration offices, where you would not have to pay at a cash desk but instead using a machine.

HN: Are there such cities already in existence? I don’t know of any.
That’s what we’re trying to change. We are operational in two cities (Beroun and Mladá Boleslav – Editor’s note) and we are planning for more. In addition, it’s not just about the function “pay and get a ticket” but “pay and get your goods directly”. We are developing that now. Many clients want to save money on cash desk operations and provide customers with greater convenience. It’s developing rather well. We could be in the black next year. We don’t own 100% of the c0mpany though; 49% belongs to the founder, Zdeněk Vacek. He had come to us looking for an investor. There also are big multinational customers. We are counting on big growth there, and that’s why we went ahead, but otherwise we don’t do start-ups.

HN: Does this mean that you want to be more active in the start-ups field?
Conservatively more active. Start-ups will never be our domain, though. We’ll always focus on operating businesses. That’ll also be the case of the Jet 2 Fund.

HN: So you are preparing to open a new fund?
Yes, we’re preparing the Jet 2 Fund, which should open in the spring of 2018. We’d like to have pulled together the capital by next autumn. We’re targeting CZK 3.5 to 5 billion, which is rather more than was the case of number 1. There, it was CZK 3.3 billion.

HN: And what’s the focus?
Jet 1 Fund is filled with individual businesspeople and investors. For Jet 2 Fund, we want also to get some institutional investors. That means we’ll need to more closely specify which industry we’d want to invest in. It’s going to be industrial and energy engineering, specialty chemistry, technical fabrics, specialty alloys, specialty construction materials, equipment for renewable energy production, and equipment for the railways, automotive, and aviation industries. The investment horizon will be 8 to 10 years, whereas in the case of the Jet 1 Fund it was 7 to 9 years.

HN: So, what is your primary motivation for bringing in institutional investors, who even in the Czech Republic are starting to be more adventurous about to whom they entrust their money. Is it to get more money? Or is the individual investors market satiated?
We have ambitions to go on and open Jet 3, for which we want to have CZK 10 billion and more. You won’t get this kind of money in the Czech Republic; you need to go abroad. Institutional investors in the Jet 2 Fund will probably be only from the Czech Republic, but it’s a step towards getting international investors. We’re the largest Czech fund and we’re already investing abroad. This is important information for foreign investors. It shows that we’re not just a big fish in a little Czech pond. And then what’s important for them, too, is that our investors will include also institutions.

HN: Jet Investment is celebrating 20 years. When you look back, what has changed the most?
Back in 1997, it was much easier to acquire companies. They were cheaper, and businesses were in a state where they could be very quickly restructured. They had excess costs, sometimes also superfluous production operations, poor management. This could be changed with simple steps and relatively rapidly, so a company you bought in the red could very quickly become profitable. This is no longer the case today; the companies are mostly well managed now. You have to take advantage of opportunities where you can use the possibility for mergers, for example, or of companies that complement one another. This makes it more complicated. Companies are also more expensive, especially just now. We were used to buying at four or four and a half times EBITDA. Today it’s almost impossible to buy a company like that.

HN: Has the situation changed also in the respect that companies used to offer themselves more and that is no longer happening, so you must do more searching?
In searching for acquisitions, we work a lot with advisors, not only from the Czech Republic but also from Germany. They bring us tips. It would be rather unusual that someone would call us up and say that they want to sell something. Such cases do exist, but they are much less frequent than those when a bank, a lawyer, or an advisor comes to you. Of course, a growing economy favours those who want to sell companies, and they can ask for a higher price.

HN: And this is related to your Jet 2 Fund, too. There are plenty of people who want to invest, but there is actually no place to put their money. And there are plenty of new, competing funds.
It’s not very easy. I can’t imagine that some unknown investor would come and try to solicit money. We’ve been on the market for 20 years, and we have built up a network of co‑operating investors who’ve had experience with us. Those 20 years give us a sort of reference base that can persuade them that we’re people who know what they’re doing, and that’s why they are investing with us.

HN: Still, there’s a big excess of various funds on the market…
Well, this isn’t exactly true. There are plenty of funds for start-ups and IT, but not that many funds like ours, focusing on traditional industry.

HN: How do you see the future of Jet Investment?
For the new fund, we’re counting on capital of up to CZK 5 billion. We’ll be again building on some basic platform, such as buying a company making modern materials or developing machines that enable doing so. And we’ll build a mosaic on that. This is how Jet 1 works, with the single difference that we transferred that base from our own portfolio. For number 2, we’ll have to buy it from scratch. This’ll be followed by Jet 3. Number 2 will have three years for making the investments, that means up to 2021. If it goes well, number 3 should open in 2022. I expect it to work on the same principle.

HN: The talk today is very much about Industry 4.0, automation, robots. Does this appeal to you? Or what role does this play in your considerations?
Payment4U is actually from this rank even though it’s not robots. But I can’t tell you today precisely what the mosaic is going to consist of. It will depend on the opportunities. We receive various offers from advisors, and we have a team analysing them. If they fit with our strategy and if we assess that it makes sense in an 8 to 10-year horizon, then we’d go for it. And we don’t really care whether the company makes robots or car door handles.

HN: Doesn’t it entice you to build a new, highly automated factory in a green field?
Our factories must of course invest, modernise, and automate their production. But I don’t think we would be direct suppliers of robots or build something in a green field. There’s big competition on the market. We build new operations in currently existing companies, and we reinvest. In contrast to purely family businesses, however, we must also distribute part of the funds among our shareholders and investors. Sometimes, family businesses focus too much on investment and overdo it. After all, we’ve bought a couple such firms which could not handle the indebtedness.

HN: Last year, you paid out a dividend of CZK 180 million to Jet 1 shareholders. How much will it be this year?
It’s going to be similar this year; we’ll be paying out CZK 185 million. In two years, that is a return before deducting a potential fee for us at the level of 16 per cent. We constantly are seeing demand for investing into number 1 and it’s starting also for number 2.

HN: What will the conditions be?
In the Jet 1 Fund, the condition was to invest at least CZK 5 million, and in Jet 2 we’re considering to increase this to CZK 10 million. We have more than 100 investors in number 1, with Jet Investment having a 38% share as founders. We’ll also be investors in number 2, but the share will be between 10 and 15 per cent instead.

HN: Is something of your group currently for sale?
For us, it’s not decisive how long we’ve had a business. We sell a company when it’s advantageous to do so. That is to say, when the market’s ready, when we feel we can’t do anything new with it, or when an interesting offer comes. That means we are perfectly happy to sell a company we’ve had even for just a year. So yes, it can easily happen that we will be selling something in the next year.

HN: The elections are coming, so it’s time to recapitulate the recent years. As a businessman, how do you see the period 2014–2017?
There is substantial pressure on tax collection, which we feel very strongly. That is not a bad thing in and of itself, quite to the contrary. But it’s necessary not to overdo it. It won’t take away the will to do business from old-timers like us, but it can crush young people’s enthusiasm. And it’s important to know how well the collected taxes are being invested, which is another question. I don’t feel that businesspeople were substantially helped in the past four years or that a perceptible change has occurred. Yes, there were interventions, but they were from the Czech National Bank, not the government. Those did help us.

HN: Isn’t the calm beneficial? Especially after the many changes during the Nečas administration.
It’s nice, of course, to be able to plan ahead. I was expecting the approach towards investments to change, for infrastructure to be improved. I had been reading all these billboards promising that motorways were going to be built, but I did not see that in fact. I can’t say that the state made doing business any easier; instead, it made it a bit more complicated.

HN: And what about the next four years? What are your expectations for October’s parliamentary elections?
I have always been a Havel person. I like democracy, freedom. I wanted Karel Schwarzenberg for president. I prefer a European orientation, a Western one, not towards Russia and China, even though they are countries offering us a number of business opportunities.

HN: The entirety of Europe is currently in a politically very complicated situation.
I’m a supporter of politicians like Emmanuel Macron and Angela Merkel. In contrast to almost all Czech politicians, I don’t mind refugees at all. If their arrival is regulated, it’s going to be an economic opportunity. When I’m travelling in Germany and Austria, refugees often work in factories, so why shouldn’t they work here? It feels ridiculous to me that we refuse quotas in the low thousands of people. That’s absurd.

HN: The absence of solidarity is the worst.
I don’t understand why people and our politicians take this position. It’s populism. The Slovaks have Andrej Kiska, and even Robert Fico has now turned a little towards the EU, they’ve pulled their heads out of Visegrád. After the elections, I’d dislike to see us join the trend that can be seen in Hungary and Poland. I hope it’ll end up pro-Western and pro-European.

***

Igor Fait (51) started out at the Brno Exhibition Centre and after the revolution he founded Brno Broker Group, one of the first brokerage firms. In 1996, he sold it to PPF. He then started an investment company, Jet Investment, which is celebrating its 20th anniversary this year.

Its portfolio includes the companies PBS Industry, Less & Timber, Kordárna Plus, Strojírny Poldi, and MSV Metal Studénka. He is a great admirer of Functionalism and has renovated several architectural monuments in Brno. He also owns a collection of modern art valued in the hundreds of millions Czech crowns. Fait has a daughter and two sons.

CARS, HOUSES, PAINTINGS
Fait’s office in an art-nouveau villa opposite the Brno Exhibition Centre is dominated by wooden panelling and solid-wood furniture, but in a cabinet in the corner there shines a small model of a McLaren P1 super sports car. The businessman has the same vehicle in his garage. “I’ve only taken it out a couple of times this year, there’s no time,” he shrugs and says the purchase of the car valued at tens of millions of crowns was an investment of sorts. Among his other pastimes, collecting paintings takes up most of his time now. He is currently expanding both the collection of modern art and the exhibition activities in his Fait Gallery. On the other hand, he is not currently planning any investments into architecture, after having rebuilt the famous Villa Münz and renovated the Zeman Café. If, however, there would appear an opportunity to buy the Brno Exhibition Centre, which is his long-time dream, he would go for it. But nothing of the sort is on the horizon…

 

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