initiative to build a writing paper machine in Husum therefore surfaces as the third strategic issue to be analyzed.

The alternative chosen by MoDo was writing paper, a grade that traditionally had low volumes and was mainly produced in the south of Sweden. An important reason for this adventurous investment was the tempting market opportunities. In this niche, MoDo could become a dominant player. The commission of the large writing paper machine in Husum coincided with an extreme growth in demand in 1972—1974, making the investment extremely profitable.

MoDo 1973—1990

Matts Carlgren, Carl Kempe’s nephew, took over the post as MD in 1971. Although he stepped down in 1985, he continued exercising dominant influence as an operative chairman of the board until 1990. He was succeeded by two nonfamily MDs during the period 1985—1990. As MoDo celebrated its centennial in 1973, the technological developments forced the company to decide between heavy investments in the chemical or in the pulp and paper business. The decision was to eventually divest most of the chemical operations and use the financial resources released to invest in a second huge writing paper machine. The investment was adventurous as the financial bases were weak at the time.

In 1975, MoDo was still controlled by the Kempe family, but the voting majority was weak. Matts Carlgren himself owned roughly 22% of the votes, the Kempe foundations 20%, and other Kempe heirs 7%, that is, in total about 50% of the company. The “Frans branch” represented by Carlgren ran the company and the “Seth branch” controlled the Kempe foundation. This division made family control fragile.

In the early 1970s an “elite division” started to emerge in the pulp and paper industry. SCA had been the industry leader for long, but now Stora Kopparberg (later STORA) emerged as a second contender. Both these dominating competitors to MoDo had strong links to banking spheres. SCA was closely linked to Svenska Handelsbanken and STORA belonged to the Wallenberg sphere, including S. E. Banken.

The term “third block,” coined by Matts Carlgren in the late 1970s, reflected the idea of a diversified holding company covering a large part of the pulp and paper product range and hence contesting the two leaders in the industry (Ericson, 1991). As we will see later, the implications of adapting this growth-related strategy were remarkable in the decade to come. The adoption of the “third block" strategy is therefore identified as the fourth strategic issue to be analyzed.

The strong belief in family control of the company offered tough restrictions on the applicable growth methods (Croon, 2005). MoDo’s indebtedness increased radically in the 1970s and in 1982 it reached 71.4%, up from 54% in 1980, high above the industry average (MoDo, Annual reports 1978—1984). MoDo pursued an aggressive financing strategy that was unusual at this time, including currency carry trade, offensive marketing to the financial market, and intensive reduction of capital tied in fixed assets.

An opportunity to implement the third block strategy followed in 1983 when MoDo, after a harsh struggle with STORA, took control over Iggesund a very profitable cardboard mill. In 1985/1986, a new opportunity to continue the strategy emerged when Holmen, a medium-sized producer of newsprint, tissue, and paperboard was for sale. When the acquisition of Holmen was eventually finalized in 1988, the group was organized as a holding company with several business areas. At this time, MoDo had almost caught up with the two rivals in terms of sales. However, soon a second internationally oriented acquisition wave began in the industry.

In 1985, MD Matts Carlgren commented on the future prospects of the group. He concluded that family ownership was long term and guaranteed the outlined strategy “in the foreseeable future.” Besides commenting on the ongoing acquisitions he also underlined features that discerned MoDo. One was R&D in which MoDo had been able to show a number of “firsts” over the years and another one was the management style of the company, “Top management will also in the future bee concentrated to a few decisionmakers that employs short and fast decision-making processes” (Matts Carlgren in Gardlund,1986, pp. 173—174, authors’ translation).

The acquisitions made in the 1980s, strained MoDo’s capital base. The urge to keep the majority ownership within the Kempe family made it impossible to make “all-share deals” as a way of financing future acquisitions. Being one of the major owners, Matts Carlgren was also personally exposed. Following the recession in the early 1990s, Matts became unable to pay interest on the loans needed to defend his ownership (Frans Kempe in Croon, 2005, Appendix, p. 219). As a consequence, Carlgren was forced to sell his shares in MoDo to SCA, one of MoDo’s major competitors and he resigned as chairman of the MoDo board in 1990. The Kempe foundation refused to follow Matts’ decision to sell to SCA and the control of the company became unclear. Commenting on the end of the family control of MoDo, Frans Kempe jr., Carl Kempe’s grandson, concluded that “The

MoDo Group has since long been managed by a strong owner-family with an industrial long term thinking. An owner family that had no financial resources outside the ownership of MoDo shares. When MoDo entered the financial ‘elite division’ neither the family nor the management was prepared or had the influential financial network needed’ (Frans Kempe in Croon, 2005, Appendix, p. 219).

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