Angus MacNaughton  CEO, Genstar Ltd.
OWNER'S SPOTLIGHT:
Reprinted in part from Forbes Magazine, February 18, 1980 issue.

It is warm for a winter day in San Francisco, and in offices high up in the Embarcadero Center over- looking San Francisco Bay, Angus A. MacNaughton and Ross J. Turner are clearly in a good mood. "People say you can't be in two places at once," says MacNaughton, laughing as he talks about how he and Turner share the CEO spot at Genstar Ltd. "But Ross and I can. Just last week I was speaking to a group in Toronto at the very same time Ross was addressing a group in Vancouver."
    MacNaughton could well be talking about Genstar itself, the $983 million Canadian conglomerate. For while Genstar's corporate offices are still officially in Montreal, since last year its executive offices have been in San Francisco. In March, MacNaughton, 48, and Turner, 49, will move to the San Francisco offices permanently to watch over Genstar's growing involvement in U.S. building materials and land development.
    Genstar has been on the leading edge of Canadian money pouring across the border. In 1978 alone the company invested $236 million in the U.S. Last year, in a bold move, MacNaughton and Turner outmaneuvered Louisiana-Pacific to snatch up The Flintkote Co., a $730 million (sales) producer of building materials such as gypsum wallboard, roofing and cement. Through the Flintkote acquisition, Genstar will become a $2 billion company this year and a major factor in building materials and land development in the Sunbelt states, particularly in California. Over the past two years MacNaughton and Turner have sold or liquidated $100 million in assets in eastern Canada to concentrate on the U.S. In Canada, Genstar is investing only in the western provinces, where it makes cement and concrete, develops primarily residential land and shopping centers, makes fertilizer and chemicals and owns a tug and barge business. It particularly likes Alberta, whose capital city, Calgary, is an oil boom town.
    In both countries its most important asset   is   its   50,000   acres   of     prime

development land. Prior to Flintkote, Genstar had acquired 8,600 acres in San Diego and another 2,400 acres in Vancouver, Wash., where it plans to develop a residential community to serve the growing high-technology industry moving into the Northwest. In addition to the raw land, Genstar also owns two home-building outfits, a thrift- and-loan company and a mortgage banking company in California. In total, Genstar has about 15,000 acres of land in the U.S., mainly within the city limits of half a dozen major Sunbelt cities. Most of its activities relate to adding value to raw land. Its construction crews, for example, build on Genstar owned land, often using Genstar  produced concrete and cement. Genstar finance companies may get involved when the homes are sold. But when home-building falls off, crews and materials can be turned to building dams, bridges and roads. While Genstar is Canada's third-largest cement producer, housing and land development accounted for almost 50% of earnings last year.

    This year, with the revenues from Flintkote, about 60% of Genstar's sales will come from its U.S. operations, and MacNaughton believes that could rise to  70% to 80% in the future. "Car will continue to grow," says Turner "but the real action will all be here in the U.S."
    Genstar's origins go back to the early  1950s, when Société Générale de Belgique, the giant Belgian multinational holding company, went into Canada looking for minerals. Genstar was its acquisition arm until 1965, when it separated its operations from Société Générale. Ironically Genstar's push into the U.S. comes hard on the heels of an equally aggressive drive to become a bona Canadian corporation. Canada's Foreign Investment Review Agency only accepted it as a full-fled Canadian company in 1977, after Genstar reduced Belgian representation on its board and appointed two Canadians, MacNaughton and Tuner, to the CEO spot. Société Générale's holdings were cut to about 15%, this year will rise again, the result of the Belgian company's acquiring a large block of stock from a British concern. To counter the review agency's objections, Genstar recently announced an offering of 3 million shares of preferred stock. The proceeds could pay down the debt from the Flintkote deal, but the offering will also reduce Société Générale's holdings to a more seemly percentage.
    Both MacNaughton and Turner in sist that Genstar will remain a Canadian corporation. But to continue growing in its primary businesses, MacNaughton and Turner insist they have to diversify out of Canada. "The businesses we like to be in relate to population growth," says Turner. Adds MacNaughton: "With $1 billion invested in the prairie states of Canada, we have a big share that market. We needed a bigger market, and the U.S. Sunbelt is 10 times as big as western Canada."
    But why the Sunbelt? "Calgary and  California have a lot in common," says MacNaughton. Says Turner. "Calgary even has a skyline like San Francisco."