A Neuron unmanned aerial vehicle (UAV), manufactured by Dassault Aviation SA, sits behind a screen on the French ministry at Le Bourget, in Paris, France. (Photographer: Marlene Awaad/Bloomberg)

French Family Makes Billions From 3D Wizardry

(Bloomberg Opinion) -- Serge Dassault, the billionaire French businessman who died on Monday, owed his considerable political clout to his family’s stake in Dassault Aviation SA, the maker of France’s Rafale and Mirage fighter jets. Owning Le Figaro newspaper cemented his influence. 

The chief source of his $27 billion fortune was less glamorous, though: A 41 percent stake in Dassault Systemes SE, which sells 3D design, simulation and industrial data management software.

Compared to fighter jets, this so-called product lifecycle management (PLM) software may sound a little dull. But customers include Tesla Inc., Jeff Bezos’s rocketship company Blue Origin LLC and flying car startup Joby Aviation Inc. Its returns have been anything but drab.

Dassault Systemes’ shares have more than doubled over five years, valuing it at 29.9 billion euros ($34.4 billion). Among listed European software vendors, only SAP SE is worth more, according to Bloomberg data. Amadeus IT Group SA, another European tech giant that operates under the radar, isn't far behind. That performance explains why the 93-year-old Dassault was ranked at 28th on the Bloomberg Billionaires Index when he died.

Had Dassault Systemes’ shares been owned more widely, it probably would have been snapped up by a wealthy U.S. or Asian suitor – a fate that’s befallen quite a few promising European tech companies, including robot maker Kuka AG and chip designer Arm Holdings Plc.

But the Dassault family's anchor shareholding   has given the business breathing space, which it seems to be using well. New license sales expanded by 11 percent last year, pretty decent for a company that was spun out of Dassault Aviation more than three decades ago. The operating margin on a non-IFRS basis swelled to 32 percent. 

A highlight was persuading Boeing Co to use the company’s 3DExperience software to help modernize its production systems. It didn't disclose a value, but Le Figaro said the Boeing deal was worth $1 billion.

With the stock trading on 38 times forward earnings, the non-family shareholders are pricing in a lot more going right. Perhaps too much given the fierce competition from Siemens AG, Autodesk Inc and PTC Inc. The shares are 6 percent ahead of the average 12-month price target compiled by Bloomberg from analysts who follow the stock.  

Still, it’s reassuring that 70 percent of software sales are recurring and that the client base is becoming more diverse. Dassault Systemes has been adding customers in life sciences, architecture and consumer goods. Plus there’s 1.5 billion euros of net cash, providing firepower for acquisitions and R&D.

Indeed, if fighter planes were the cornerstone of the Dassault family’s influence during the last century, 3D software will probably take its place in this one. Silicon Valley and China are building the future, but they're using French tools.

©2018 Bloomberg L.P.

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