As successions go, Cascades Inc.’s transition is as soft as the Quebec company claims its toilet paper to be. Yet when the youngest of the Lemaire brothers leaves the presidency to an outside executive, a first since the company was founded five decades ago, it will mark the end of one of the most storied adventures of Quebec Inc.
Of all the entrepreneurs that rose in the 1960s and 1970s as French Quebeckers took their destiny into their own hands, none stood out more that the flamboyant Bernard Lemaire. The Lemaire family’s rags-to-riches story captured the imagination of Quebeckers.
In 1964, Bernard Lemaire and his two younger brothers, Laurent and Alain, bought a closed-down paper mill in Kingsey Falls, in the Centre-du-Québec region, with their father, Antonio Lemaire. This Drummondville man, a “patenteux” whose ingenuity more than made up for what he lacked in formal schooling, had previously made a business out of the used paper and bottles he started collecting after losing his job in the 1950s.
The Kingsey Falls plant started producing paper with recycled fibre. It gave birth to Cascades, a $3.6-billion packaging and tissue products manufacturer that employs 12,000 people in a hundred plants in Canada, the United States and in Europe. So big a star did Bernard Lemaire become in the 1980s in Canada and in France, where he bought plants and where Cascades’s stock traded, that Air Canada used him in an ad to attract skiers to the French Alps, recounted former journalist Matthew Fraser in his 1987 book Quebec Inc.
“You can succeed the Lemaires, but you can’t replace them,” said chief operating officer Mario Plourde, who will take the helm of the company on May 9, just days after the current president and CEO, Alain Lemaire, turns 66.
Mr. Plourde is as close to a Lemaire as you can be. The 51-year old executive was raised in Danville, a mere 12 kilometres from Kingsey Falls. He briefly dated Sylvie Lemaire, Bernard Lemaire’s daughter and an entrepreneur in her own right, when they were in school. And while attending CEGEP, he worked in the summers at a Cascades sorting plant, where he bundled scraps of paper. He is a company man in the Japanese sense, with a 28-year history at Cascades.
The brothers chose Mr. Plourde, a protégé of Laurent, over two seasoned Cascades executives: Suzanne Blanchet and Marc-André Dépin. Patrick Lemaire, the 49-year-old engineer who presides over power producer Boralex, took himself out of the race because he felt less versed in finances, his father Bernard said. “It [Boralex] is enough for now,” he said.
Rarely has a business transition been so carefully planned out. Mr. Plourde was identified as successor two years ago. Moreover, the Lemaires won’t go far away.
They plan on retaining their 34-per-cent stake in the company. Alain Lemaire will stay as executive chairman while Bernard and Laurent will both retain their seats on the board. The brothers will also attend the monthly executive committee, although Bernard has been missing meetings because of his latest endeavour. He is raising a herd of 600 Highland cattle that are roaming freely in Danville and in Austin, where he lives. “I can’t stop myself from venturing into new businesses, it’s an illness,” said Bernard, 77, while his two brothers rolled their eyes.
Under the Lemaire’s leadership, Cascades has won praise for its commitment to the environment and for the way it shares profits with its employees. Yet there is a bittersweet feeling to the Lemaire’s departure. Cascades’s stock, a market darling in the 1980s – at one point the Lemaire family was said to be the 10th richest in Canada – has been in the doldrums for years. It now trades at around $4.50, where it was in 1990.
The company is worth a little over $420-million. That is less than half of its book value. And it’s even less than the company’s last investment, a $430-million (U.S.) plant in the state of New York.
“It is a disappointment,” conceded Alain Lemaire. “It hurts,” added Bernard, admitting that the company’s debt level is too high – net debt is five times operating earnings. The eldest of the Lemaire brothers blames the Chinese buyers that pushed up the prices of recycled fibre, the high-flying loonie, etc. Cascades reported a profit of $16-million last year after a loss of $14-million in 2011.
Yet the company’s new action plan is, in itself, an admission that Cascades needs to step up its game. The company is shedding businesses and plants, while it is investing in machinery and information technology systems. And as Cascades builds its Greenpac Mill plant in New York, it is increasingly turning toward the United States, where labour costs are half as much as in Quebec, as Alain Lemaire often remarks.
The Lemaire brothers’ smooth retreat is grabbing all the attention. But for Quebec, Cascades’ shift away from its homeland may be more unsettling.