D'Ieteren SA DIE-BB
January 27, 2014 - 8:03pm EST by
2014 2015
Price: 35.00 EPS $0.00 $0.00
Shares Out. (in M): 55 P/E 0.0x 0.0x
Market Cap (in $M): 1,911 P/FCF 0.0x 0.0x
Net Debt (in $M): 419 EBIT 0 0
TEV (in $M): 2,330 TEV/EBIT 0.0x 0.0x

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  • Automobiles
  • Belgium
  • vertically integrated
  • Fragmented market


Long D’Ieteren SA (DIE-BB)



D’Ieteren is a Belgium-based auto services company that operates under two segments:

D’Ieteren Auto – The #1 car distributor in Belgium (~20% market share), exclusively offering VW cars

Belron – The global leader in the Auto Glass Repair & Replacement (AGRR) industry

D’Ieteren Auto

I will be brief on the Auto segment as Belron is the more interesting part of the story.

D’Ieteren Auto is the exclusive seller of VW cars (Volkswagen, Audi, Seat, Skoda, Bentley, Lamborghini, Bugatti, Porsche) in Belgium.

Auto retailing is a decent enough business, but results have been weak as of late due to a government-sponsored incentive program that ended in 2012.  From ’07-’11, the Belgian government subsidized purchases of cars with low emission by offering 15% savings, up to EUR 4,640.  2011 was a banner year for the Belgian car market as significant demand was pulled forward by consumers that wanted to take advantage of the subsidy before expiration.  As you can imagine, sales subsequently fell off a cliff (572k to 487k) in what is otherwise a steady, low-growth market.


  2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Belgium New Car Registrations 515 489 468 459 485 480 526 525 536 476 547 572 487 486
YOY   -5% -4% -2% 6% -1% 10% 0% 2% -11% 15% 5% -15% 0%
D'Ieteren Operating Margin         3.1% 2.5% 3.3% 3.7% 3.3% 2.7% 3.4% 3.6% 1.9% 2.7%(HY)


The drop in sales led to fierce competition as dealers tried to entice customers with strong incentives in the absence of government subsidies.  Margins fell well below historic norms.  However, these weak results are not a permanent impairment.  Just as the Auto segment was over-earning in 2010 and 2011, they have been under-earning in 2012 and 2013.  The true earning power lies somewhere in the middle.  If a normalized sales environment is closer to 510-520k cars per year, and D’Ieteren maintains similar market share with margins closer to historic averages, EBITDA will come in around 75-80m.  At a 6x multiple, I value this segment at 450-480m.


Belron, despite the name sounding like a portmanteau of “Belgian Enron,” is a great business.  Belron is the industry leader and 800-pound gorilla in the Auto Glass Repair & Replacement market.  You probably have never heard of Belron, but are likely familiar with one of its subsidiaries, depending on your location: Safelite, Autoglass, Carglass, SpeedyGlass, etc.

On its face, the AGRR industry is a challenging one.  Anyone with a van, some tools, and a little knowhow can open their own business.  Why would you want to invest in an industry with such low barriers to entry?

Belron has managed to carve itself an attractive position via its scale and vertical integration.  In addition to glass repair, Belron serves as a third party claims administrator to insurance companies.  When you call the ‘glass claims’ number for your insurance company, you will likely be speaking with a Belron employee.  In the US, Belron’s Safelite division serves as the claims administrator for Allstate, Nationwide, GEICO, Progressive, USAA, Farmers, & Liberty Mutual.  The only big guy I notice missing is State Farm.

Belron’s position as a claims administrator guarantees a steady flow of repair work.  As the market leader in a highly fragmented industry, Belron can spread high volume across its workforce, effectively making it the lowest cost provider.  The value proposition between Belron, the insurance companies, and the ultimate insured is strong, unique, and serves as a win-win-win:

Insurance companies save money by outsourcing their claims function and receiving a volume discount on repair work.  Given Belron’s scale, they can offer Guaranteed Average Invoicing, effectively removing severity as a variable for insurance companies in glass underwriting.  Insurance companies also know their insureds will be serviced by certified technicians with a standardized quality of work.

End customers are able to report a claim and schedule a repair with a single call.  With the largest repair network, Belron is most able to schedule a repair at a time and place that is convenient for the customer.  Again, the quality of work is uniform and certified.

For Belron, receiving the highest volume of work means the least idle time for technicians.  This makes expansion and acquisitions highly accretive.  For example, purchasing an existing glass shop that was doing 7 jobs a day and directing additional volume to it significantly improves profitability.  Those familiar with the Boyd Group Income Fund should recognize this strategy and its efficacy.

Due to the above dynamics, Belron has been able to consistently gain share.  The AGRR industry is highly fragmented and primarily populated by independent “mom & pops.”  Belron has been a serial acquirer and there continues to be a long ramp for continued consolidation in the AGRR industry.

Belron has grown EBITDA each year until experiencing a slowdown in 2012 (concurrent with the Auto slowdown, ouch!).  This was attributed to an extremely mild winter and soft Eurozone economy, featuring lower miles driven and a lower propensity to have damaged windshields repaired.  I am not overly concerned about the recent tough industry conditions.  Repair jobs are highly weather-dependent, so you should expect lumpy year-over-year results.  Further, challenging industry conditions will fall harder on independent shops that lack Belron’s volume and geographic diversity, further facilitating share gains in the out years.  I am also OK with margins.  As the primary cost is employees, costs can always be right-sized to meet workflow.


  2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 HY
Total Jobs (mil) 4.9 5.3 6.1 8.4 9.4 10.7 11.7 11.3 10.4 5.6
% Change   8% 15% 38% 12% 14% 9% -3% -8% 4%
EBITDA          123          128          154          208          234          282          334          347          295          146
EBITDA-CapEx          100          116          121          161          187          187          217          249          198          107


If you agree with my mark for D’Ieteren Auto, you’re getting Belron for an EV of a little under 1,900, or roughly 6.25x 2013 EBITDA, or 9.5x EBITDA-CapEx.  I don’t think it’s a stretch to get back to 2011 #s, which would be multiples of 5.5x EBITDA or 7.5x EBITDA-CapEx.

D’Ieteren currently owns 94.85% of Belron.  As a sanity check, I went through the implied valuation of Belron based on past exercises of the put/call arrangement between D’Ieteren and the minority holders:

Date Interest Acquired Implied Equity Valuation
Nov-99 68% 400-600
Jan-05 4.50%                          690
Mar-07 3.65%                          849
Sep-09 16.35%                      1,682
Mar-13 2.12%                      1,840


The most recent mark isn’t far off the current market cap of consolidated D’Ieteren (1,911m).

I do not hold a position of employment, directorship, or consultancy with the issuer.
I and/or others I advise hold a material investment in the issuer's securities.


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