Power Corporation diversifies to boost shareholder value

Montreal-based Power Corporation of Canada is diversifying its international portfolio of funds to increase shareholder value


Founded in 1925, Power Corporation initially had interests in hydroelectric services. As the industry was gradually nationalised in the decades after, Power Corporation used the resulting capital to invest in a range of companies. Meanwhile, Paul Desmarais Sr was building his own business throughout the 1950s and 60s with a regional bus company at its core. In 1968, he exchanged his various investments with Power Corporation to acquire a majority interest in the company and became its CEO.

Paul Desmarais Sr developed a new strategy for the corporation, shedding assets he felt were not core to its new focus in the financial services, industrial and communications sectors. He turned Power Corporation into a multinational, expanding it into Europe and Asia.

Desmarais’s sons, Paul Jr and André, became co-CEOs in 1996. Among the company’s key assets in the early 90s were Great-West Life, an insurance company, and Investors Group, in the mutual fund business.

The Desmarais brothers set out to consolidate Power Corporation’s position in these two sectors and launched a series of measured, highly strategic acquisitions – ultimately propelling the Power group to the number one position in Canada in both life insurance and mutual funds over the course of a decade.

Power Corporation today
Through its subsidiary Power Financial Corporation, Power Corporation today has a majority stake in life and health insurer Great-West Lifeco and its North American and European subsidiaries, Great-West Life, London Life, Canada Life, Putnam Investments, and Great-West Life & Annuity Insurance. Power Financial’s subsidiary IGM Financial holds its asset management and financial advisory services companies, Investors Group, Mackenzie Financial Corporation, and Investment Planning Counsel.

In Europe, Power Financial and the Frère family group jointly hold 62.9 percent of the voting rights in Pargesa Holding SA, the Pargesa group’s parent company based in Geneva, Switzerland. Pargesa, through Groupe Bruxelles Lambert, in turn holds significant interests in six major companies: Lafarge (cement and building materials), Imerys (industrial minerals), Total (oil and gas), GDF Suez (electricity and gas), Suez Environnement (water and waste management) and Pernod Ricard (wines and spirits).

In 2005 Power Corporation was named as a qualified foreign institutional investor by the Chinese government; the first Canadian company to be granted such status.

Business philosophy
Power Corporation’s investment philosophy is driven by its long tradition of deep fundamental analysis. The company places great emphasis on strategy, effective human resource management, judicious deployment of capital, and a conservative approach to balance sheet management. Where appropriate, such as with the Frère group in Europe, the Corporation partners with like-minded investors to pursue new business opportunities.

Power Corporation’s management philosophy is predicated on a business model that encourages active involvement on the boards of directors of the companies it invests in. It is a philosophy informed by a prudent risk management culture and a long-term perspective.

The company had 2010 consolidated revenues of $32bn and operating earnings of $1bn. Total assets under administration at year-end 2010 were over $600bn.

Power Corporation has a long tradition of acting in a responsible and ethical manner, and of being actively and positively present in the communities where it operates. The company consistently donates more than one percent of its pre-tax domestic profit annually to some 800 charitable organisations.

Strategic vision
Power Corporation is committed to enhancing shareholder value through the active management of long-term investments and responsible corporate citizenship. These objectives are best achieved and risks minimised through sector and geographic diversification.

The company believes that the future belongs to those corporations having a well-defined strategic vision anchored in strong core values. These principles guide the corporation in all of its investment decisions.