French Billionaire Drawn Into Political Storm as Shipping Wealth Soars

French Billionaire Drawn Into Political Storm as Shipping Wealth Soars
Tara Patel September 8, 2022 https://www.bloomberg.com/news/articles/2022-09-08/french-shipping-billi...

Course 105.3 degrees, speed 9.7 knots: The cargo giant Jules Verne steams toward the Port of Los Angeles en route from China. It's yet another lucrative run for French billionaire Rodolphe Saade.

Less than a decade ago, with the shipping industry in the doldrums, thousands had anxiously looked on as the Jules Verne — at the time, the largest container ship in the world — was inaugurated on the Mediterranean by none other than the president of France.

Today, after years of near-crisis, the entire sea-freight sector is awash with profit — and the Saades, through their CMA CGM SA have amassed a fortune that not even Aristotle Onassis might’ve imagined. With a private fleet of some 580 ships, the Saade family is worth $19 billion, according to the Bloomberg Billionaires Index, placing it alongside such storied industry names as the Kuehnes of Germany and the Apontes of Italy. The vast majority of that fortune was accrued in the past few years alone.

“His recent wealth expansion catapults him into the upper ranks worldwide as a modern-day shipping magnate who on that scale has readily eclipsed legendary individuals like Onassis and (Stavros) Niarchos,” said John McCown, industry veteran and founder of Blue Alpha Capital. “His company's earnings over $25 billion in the last 12 months has probably overtaken whatever the record was for tangible earnings over any 12-month period.”

The rapid surge in Saade’s wealth because of the trade disruptions caused by the pandemic has put him and his company in the crosshairs of politicians across the spectrum in France, seeking to penalize his firm for its gains as rising prices of everyday items hits households. It has made him, the publicity-shy second-generation head of CMA CGM, easy fodder for popular radio and television talks shows.

“It’s time to tax those who profit from the crisis and who got hugely rich,” said firebrand far-left leader Jean-Luc Melenchon.

CMA CGM isn’t alone in drawing criticism for huge profits during the pandemic and now, with much of the world grappling with decades-high inflation levels. US President Joe Biden recently slammed Exxon Mobil Corp. for making “more money than God.” In France, giants like TotalEnergies SE have drawn heat for high gas prices and President Emmanuel Macron said on Monday that he backs a European Union-wide windfall tax on the profits of energy companies.

For now, CMA CGM has escaped the potentially punitive levy, with a proposed bill narrowly rejected by lawmakers in July and the government saying it doesn’t favor such a move. But Prime Minister Elisabeth Borne has left the door open for the possibility, and her government has indicated that it wants companies recording large gains to aid ordinary citizens.

“All companies that have the financial possibility to help households in difficult circumstances have to do it,” Finance Minister Bruno Le Maire said this week, adding that CMA CGM and TotalEnergies “can maybe go further.”

CMA CGM has announced a series of measures aimed at deflecting criticism, including freezes and rebates on some freight rates, the creation of a fund for cleaner energies and bonuses to staff with the lowest wages. Still, Saade has warned that lowering rates might not help consumers much — taking just $1 or 1 euro off the price tag of a pair of running shoes imported by container from China, for example.

For the family, the political uproar has come at what could be the tail end of a shipping industry boom, which was fueled by a shortage of maritime capacity to move cargo across the seas, and drove some freight rates to above $20,000. Saade was grilled over his company’s gains in the French Senate, appearing before the body for the first time in a ritual all too familiar to the heads of many of the country’s prominent companies. Over the course of more than two hours, he portrayed CMA CGM as a “patriotic” French champion that reinvests profits and hires local workers.

“When my freight rates were at $350, where were you?” Saade asked senators during the July hearing. “We weren’t sure at one point if we would get through the week. No one came to speak with us or say something. We had to figure it out.”

Saade, who hails from a very private family in the port city of Marseille, has been shaken by the intensity of the debate over the company’s success. Having been on the brink of default in 2009 — when the global financial crisis brought trading to its knees — the firm’s rebound should have been a cause for celebration, Saade said. Last week, CMA CGM reported a more than doubling of its second-quarter profit to $7.6 billion, exceeding the $7.2 billion in the previous three months, when it paid shareholders a $1.5 billion dividend — about three-fourths of it to Saade’s family holding company Merit France.

“It is great that the company is profitable because it allows for the possibility of continuing to develop and hire,” he told Bloomberg last month in Algeria, where he was traveling with Macron on an official visit. “If operations are not working and there are no profits, how could we possibly keep going? Should we all start losing money and close our business?”

The fortunes of closely held CMA CGM and the Saade family have risen and fallen with those of the shipping industry. Rodolphe’s father, Jacques, an immigrant from war-torn Lebanon, founded the Compagnie Martime d’Affretement in 1978 with one leased vessel, a single route across the Mediterranean and a staff of four. When he died in 2018, he left behind a global empire that, in addition to its vessels, now owns France’s biggest logistics company, stakes in flag carrier Air France-KLM and a satellite operator and, soon, regional newspaper La Provence.

To build CMA CGM over 40 years, Jacques initially rode a wave of growth in container vessels, the workhorses of global trade. He focused on shipping lines to Asia, ordered mega-sized vessels and acquired nine rivals for scale — from France’s debt-laden Compagnie Generale Maritime in 1996 to Singapore’s Neptune Orient Lines two decades later.

The family’s business has seen some tough times in a sector that’s known for its cycles of boom and bust. Economic growth fueled expansion and investment in new vessels followed by slumps in demand, overcapacity and crushing debt. The financial crisis in the last decade led creditors to force the temporary removal of Jacques as CEO along with a hunt for new capital that widened the shareholding. Turkish family-owned Yildrim Holding Inc retains 24% of CMA CGM, while French state fund BPIfrance has 3% and board representation.

The founder spearheaded the building of CMA CGM’s 33-storey headquarters on Marseille’s dockside, designed by the Pritzker Prize-winning Iraqi-British architect Zaha Hadid, and ruled a tight-knit, business-focused clan that kept deep roots in Lebanon. The Saade family owns its stake in CMA CGM through Merit France, held in equal parts by Jacques’s three children Tanya, Rodolphe and Jacques Junior.

Rodolphe, who joined the firm in 1994 after a brief stint starting a water-cooler business in Lebanon and earning a commerce degree from Concordia University in Montreal, took the helm in 2017 after his father turned 80 — just months before his death.

In his nearly five years as CEO, Rodolphe has sought to put his own stamp on the company through diversification and acquisitions, which picked up pace this year. Recent forays pitted him against other European billionaires. He faced Xavier Niel in his battle for control of the Marseille-based newspaper La Provence. Air France-KLM, in which CMA CGM has a 9% stake, was part of the consortium picked by the Italian government to hold exclusive talks for control of ITA, the successor to Alitalia, beating out a group backed by shipping rival Gianluigi Aponte.

Under Rodolphe, the company has also edged closer to the French state by investing in companies in which the state has stakes, like Air France-KLM and Eutelsat. In April, CMA CGM obtained French government backing to acquire a logistics company controlled by a sanctioned Russian railway. The following month, the CEO reached a watershed deal after a year of negotiations for a cargo tie up with state-controlled and debt-laden Air France-KLM. CMA CGM is its third-largest shareholder after the French and Dutch governments.

Nearly a decade ago, founder Jacques acknowledged a gap with the French establishment, saying in a 2013 interview he “wouldn’t go out dancing with them.” At the time, he noted that Rodolphe handled relations with the government-fund shareholder. That experience should come in handy now.

“We have very good relations with the government, and often talk about some important subjects,” Rodolphe told French Senators in July. “Some of the deals that we achieved, we achieved them in close collaboration with the government.”

— With assistance by David Gillen, Alan Katz, Samy Adghirni, and Brendan Murray