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CORPORATE FINANCE
Reinventing Invensys
The British company,s new CEO has a reputation as a turnaround artist, and he has boosted its stock price. But investors aren,t sure it can actually make money.
July 2002
Institutional Investor
Magazine
When Rick Haythornthwaite took over as chief executive of British automation control conglomerate Invensys last October, the company was on the brink. Born of a 1999 merger between two slow-growth engineering companies, Invensys was making everything from washing machine timers to software for nuclear power plants. Its market share in automation controls had shrunk to less than 6 percent from 11.7 percent at the time of the merger, and its stock had plummeted to 27.5 pence from a 1999 high of nearly 400p. With debt of L3.2 billion ($4.8 billion) and negative free cash flow, the company was close to insolvency.
A geologist educated at the University of Oxford, Haythornthwaite was a breath of fresh air. His predecessor, a burly American named Allen Yurko, was best known for possessing a temper so fierce that London reporters had dubbed him the Mr. Nasty of the FTSE 100. He hobbled Invensys with endless rounds of layoffs and asset sales; his most dramatic strategic move was overpaying for Baan, a money-losing, scandal-plagued Dutch software company.
Haythornthwaite, by contrast, exudes a quiet charisma and openness - qualities that have calmed the nerves of rattled employees. His resume includes a successful 17-year stint at British Petroleum Co., where, among other accomplishments, he turned a struggling oil field into a moneymaker. And in 2000, as CEO of cement maker Blue Circle Industries, he thwarted a takeover bid by French rival Lafarge, becoming the first head of a major U.K. company to fend off a hostile all-cash offer in 15 years.
In his nine months manning the switches at Invensys, the 45-year-old Haythornthwaite has considerably improved its situation. He took a hard look at the company's 24 business units and designated eight high-cost manufacturing subsidiaries for divestiture, lumping them together in a special division. He has sold off four so far, yielding almost half of the L1.5 billion he promised shareholders he would raise by March 2003. He has reshuffled 14 other, less capital-intensive businesses into three new divisions, each with a clear focus....