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ENA Investment Capital Publishes Open Letter to Ontex Shareholders


ENA Investment Capital (“ENA”), a long-term, value-oriented investment firm and the second-largest shareholder in Ontex Group NV (“Ontex” or the “Company”) owning c.15% of the Company’s outstanding shares, today issued the following public letter to Ontex’s shareholders.

Dear Fellow Ontex Shareholders,

ENA Investment Capital, owning c.15% of the voting shares of Ontex, has devoted considerable time and resources to conduct a thorough analysis of Ontex. This includes acquiring a comprehensive understanding of the personal hygiene segment and, more importantly, of the Company’s turnaround potential which we are convinced, if effectively executed, can deliver significant value for shareholders.

As part of this extensive 18-month due diligence effort, we have consulted with former executives from Ontex as well as its main competitors, industry experts, investment bankers, lawyers and specialist consultants on a wide range of topics critical to Ontex’s business such as raw material trends and others. To assist us, we have partnered with two industry veterans who collectively have more than half a century of industry experience: Mr Gustavo Calvo Paz, the former President of Kimberly-Clark in Europe, and Mr Rodney Olsen, the former CFO of Kimberly-Clark International and Kimberly-Clark Asia-Pacific. We have also partnered with Mr Philippe Costeletos, the former head of Europe for private equity firm TPG, which owned Ontex between 2010-2014.

In the months since our public letter in February, we have had extensive private engagement with the Company including the exchange of seven letters with the Board, direct correspondence with the former and current Chairman, as well as discussions with reference shareholder GBL, other Board members and the Company’s appointed “defence” advisor Bank of America.

Following months of private engagement with the Company which culminated in the termination of former CEO Charles Bouaziz, we would like to share our perspectives on the current situation and the issues about which we are seeking specific assurances from the Board:

1. Ontex needs to immediately reset its strategy, review its global portfolio and broaden the scope of its restructuring plan

The termination of the CEO offers a unique opportunity for the interim management team – which had previously voiced internal dissent over the strategy devised by former CEO Charles Bouaziz – to undertake a comprehensive review of the Company’s strategic direction. It should do so unburdened by the past. Mr Bouaziz’s termination also allows the Board to be unhindered and to explore potential strategic alternatives or combinations (be they public or going private) that could maximise shareholder value.

We are concerned, however, that if management and the Board are not held to account then this could be yet another missed opportunity. The history does not read well.

The strategy pursued all these years with the acquisitions targeted has led to substantial value destruction. The 2019 restructuring plan (“T2G”) was a last-ditch attempt to stop the rot of a failed strategy, loss of market share and deteriorating margins. At its very announcement in May last year, however, Ontex’s share price collapsed 29% in just the 2 days following, and another ~20% from then until the CEO’s dismissal a few days ago. Shareholders clearly flagged their disapproval of this strategy from the moment of its public inception, and unfortunately their trepidation was proved right. Mr Bouaziz’s removal is a significant step forward that was long overdue and we hope not too late.

Ontex is left facing a series of complex tasks to revive its business and restore credibility. The next permanent Ontex CEO, be it an internal or external appointee, will need a unique mix of specific industry expertise, proven turnaround experience, and credibility with the capital markets. Viable candidates that meet these criteria are not easy to find, and we expect that a search for a new high-calibre CEO will take time. Time, however, is something Ontex does not have.

  • The current management team, liberated from the influence of the prior CEO, should be brave in re-examining the Company’s failed strategy and un-ambitious T2G restructuring plan.

Management should aim to stabilise any loss of market share and restore cost competitiveness rather than reporting procurement gains that are, in reality, raw material tailwinds. We understand that interim CEO Thierry Navarre was one among several on Mr Bouaziz’s team who had pushed for a wider restructuring plan and had identified areas for additional improvement that were unfortunately ignored. We urge Mr Navarre and others to stand by these principles now that the influence of Mr Bouaziz has been removed.

Moreover, the CFO must move away from the non-standard and meaningless accounting measures introduced by the former CEO which masked deteriorating margins behind “alternative performance measures” such as “adjusted EBITDA” and “adjusted EBITDA at constant currency” despite the annual recurrence of what he called “non-recurring expenses”. To be clear, investors value the company on the basis of reported EBITDA.

2. Ontex is significantly undervalued - seeking meeting with the senior management team to discuss our value creation plan

We strongly believe thatOntex is valued significantly below its intrinsic value and has huge turnaround potential in terms of growth, margin improvement and cash flow conversion.

Based on the work we have done with our industrial partners (and various others) and validated by former executives of Ontex who were pushed out or resigned in disagreement with the failed strategy of the former CEO, we have developed our own well prepared views on Ontex’s ability to improve gross and EBITDA margins as well as cash flow conversion, under conservative low growth revenue assumptions.

  • If Ontex pursued our plan, it should be able to deliver for shareholders ~300-400% returns from the current level over the mid-term based on our estimates.

Our targets are conservative, highly achievable, and entirely consistent with peers’ metrics. If the management team rejects them and/ or the Board cannot compel the management team to execute such a plan, it is due to either lack of ability, lack of ambition or – worse – both.

We think it is fair to have a thorough and sincere exchange of views with the current management team before we go public with such a plan. As such, we will be reaching out to the Company to meet with the new interim CEO as well as the CFO and other senior members of the management team to better understand their views on a broader restructuring plan as well as the targets we believe this business should be able to achieve.

3. Strategic alternatives need to be also considered, in parallel to a comprehensive CEO search and to developing a new stand-alone strategy

Notwithstanding the development of a credible standalone plan, the Board should form a “Strategy Committee” to work alongside the current management team (on a credible standalone strategy) and, in parallel, also explore various strategic alternatives.

The Board should not waste time. All strategic options should be on the table while searching for the right CEO in an accelerated timeframe. If they refuse to do so, the Chairman and GBL, the reference shareholder with representation on the Board, should provide a thorough explanation to shareholders as to why they think such a review is unnecessary.

Ontex is a company that was twice owned by private equity and still possesses attractive characteristics for private equity given its significant turnaround potential and market dominance in a high barrier to entry environment where retailer brands constantly win market share from branded competitors. The removal of Mr Bouaziz opens the door for such an approach. In addition, there are strategic M&A options available which have not been diligently explored so far, each of which could significantly rerate Ontex.

4. Seeking meeting with the Chairman as well as reference shareholder GBL

Given the gravity of the situation, we feel obliged to speak out at this critical time for the benefit of all shareholders.

So far, we have engaged with Ontex primarily in private out of respect for the Company as it managed through the Covid-19 peak. Despite our sincere efforts to work cooperatively and outside of the public domain, the Board frustrated our attempts at constructive dialogue by either dithering or forcing us to deal with a CEO for whom our objections were well known. We are hopeful that the Board’s decision to remove Mr Bouaziz signals a new openness and humility that will allow for meaningful dialogue about the future of our Company.

However, the share price performance prior to, and since, Mr Bouaziz was released from his role clearly shows that shareholders are losing what little confidence remains in the Company’s ability to remedy its vague strategic direction, poor execution, and a lack of strong Board oversight.

We will be meeting with the newly appointed Chairman Hans Van Bylen later this month and we will also seek to meet with a representative of GBL should they accept our invitation. We sincerely hope that Mr Van Bylen and GBL, respectively, approach these meetings with an open mind and without the excess of pride that blinded Mr Bouaziz to any constructive criticism and the facts. Both need to appreciate the seriousness of the situation and the urgent need to undertake our well-intentioned actions outlined above. Moreover, they need to be fully aware and honest about the magnitude of the tasks required by this Board to finally deliver value for all shareholders as well as reward the Ontex employees globally who have had to bear the cost of the restructuring.

Towards this goal, in these meetings, we will be asking for:

  • Assurances that…The current Board of 8 members (some of whom having served since the 2014 IPO) has the capacity and appropriate industry and turnaround expertise to pursue simultaneously and in a short timeframe the following critical tasks:
    • A comprehensive CEO search, including internal and external candidates, to ensure the best management team is in place to lead a turnaround of the Company;
    • Provide hands-on support and oversee the current management team as it stabilises the business in Europe and reassure its employees;
    • Actively help and guide the existing management team to reassess its current strategy and develop a new turnaround plan;
    • Actively verify the US growth opportunity and assist with the execution, a key strategic objective for Ontex after the recent acquisition; and
    • Establish a special “Strategy Committee” of qualified, industry knowledgeable individuals to work (a) alongside the current management team in reviewing strategy and turnaround plan; as well as (b) consider, explore and assess other strategic corporate alternatives for the Company (remaining public or going private, as a standalone company or combining with a competitor) to ensure the best outcome is decided for the Company, its employees and shareholders.
  • Assurances that…The Boardwill run a comprehensive, objective, and transparent CEO recruitment process that takes into consideration input from shareholders, including those not presently represented on the Board.
  • Assurances that…The Board will be open and supportive of the actions that management needs to take in order to review the current strategy and develop a value creation plan following our meeting, along the lines we describe above.

Both the Board and GBL must appreciate the urgent need for such assurances to be provided to shareholders.

We remain available to any fellow shareholders who wish to exchange thoughts, provide suggestions, or voice concerns so that we can share them with the Chairman, management and the reference shareholder GBL.

We are all in this together.


ENA Investment Capital

Contact information

Media contact
Kepler Communications
Charlotte Balbirnie
+44 7989 528421

Michael Henson
+44 7551 720441

Investor contact
ENA Investment Capital; +44 20 3772 0170

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