 Focus : Activist Holders Prize Open French Boardroom Doors |
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PARIS (Dow Jones)--French boardrooms are facing a shake-up as investment firms inject a dose of shareholder activism into the prevailing corporate culture.
Investment firms Wendel Investissement SA (MF.FR) and Eurazeo SA (12112.FR) have made high-profile forays into blue-chip French companies in the past year, demanding board representation and better returns for shareholders.
Recent share price falls have made stake-building in blue-chip companies cheaper. Meanwhile, investment companies, which have seen a decline in their asset values, are feeling pressure to generate a better return on their investments - hence their more aggressive behavior, adopting tactics used previously by U.K. and U.S. investors.
"Clearly the Anglo-Saxon investment funds have been the first to rattle the tree, and Eurazeo and Wendel are following suit," a banker close to Eurazeo said. "The trend highlights the evolution of French capitalism and mirrors what has already happened abroad."
Wendel has spent nearly EUR6 billion to become the biggest single shareholder of building materials group Compagnie de Saint-Gobain SA (12500.FR), with a 21.5% stake.
Eurazeo, which is acting in concert with U.S. fund Colony Capital, paid more than EUR1 billion for an 8.5% stake in hotel group Accor (12040.FR).
Wendel has aggressively built up its stake in Saint-Gobain since last September, triggering fears of a creeping takeover among the building company's management amid considerable friction. Wendel has demanded a bigger say in the group's business strategy, as well as arguing about the company's voting rights. At a shareholders' meeting in early June, it won three Saint-Gobain seats and approval for the creation of a strategy committee on which it will be represented.
Wendel says it is a medium-term investor in the company and expects the share price to rise strongly, thanks in part to the cost-cutting and push into emerging markets that it is encouraging.
Eurazeo and Colony's relationship with Accor has been less fraught, but the investors said they plan to raise their stake in the hotels company to 30% and want to make sure they get a return on such a large investment.
Even though he dismissed the comparison with so-called Anglo-Saxon investment funds, Eurazeo Chairman Patrick Sayer has made it clear the investment company plans to play the same role at Accor as it has at companies such as electrical equipment retailer Rexel (RXL.FR) and satellite operator Eutelsat Communications (1022123.FR), which it bought as private assets and later floated.
"We are already very active and involved at Rexel. Accor will be no different. Being on Accor's board should give us the same influence as in Rexel today or Eutelsat before we sold our stake," he said, adding that Eurazeo doesn't intend to "put any abnormal pressure" on the hotel group.
Until recently, Wendel and Eurazeo invested mostly in unlisted assets. Eurazeo also has passive minority stakes in international foods group Danone SA (BN.FR), the utilities and waste management group Veolia Environnement SA (VE) and industrial gases group l'Air Liquide SA (AI.FR), but it has said it wants to sell most of its Veolia and Air Liquide shares to raise cash.
The French investors' move to greater activism comes after foreign funds Pardus Capital Management PLC, Centaurus Capital Ltd. and Colony Capital Management Inc. launched a series of assaults over the past two years on the likes of automotive equipment maker Valeo (13033.FR), IT services group Atos Origin SA (5173.FR) and retailer Carrefour (120117.FR).
Pardus and Centaurus, in particular, have publicly criticized the strategy of the companies in which they have invested, demanding board representation, strategy changes or management shake-ups to boost shareholder value. And they have been getting results.
After battling for representation for its 20% stake in Valeo, a Pardus representative is set to be elected to the board. It wants Valeo to sell or beef up underperforming assets. And Pardus and Centaurus acted together to get on to the board of Atos and force the resignation of Chairman Didier Cherpitel. Such activism hasn't endeared the investment companies to the managements they challenge.
"The funds aren't owners of the business, they must behave like responsible directors for all shareholders," Cherpitel told Dow Jones Newswires last week in an interview.
Saint-Gobain Chairman Jean-Louis Beffa told the group's annual general meeting recently, "a single shareholder cannot control a listed company even if it holds, as is the case for Wendel, a significant stake in the company," though he said Wendel's stake entitled the investment company to board representation.
Valeo Chairman Thierry Morin has told Dow Jones Newswires in the past that although he is "very respectful" of an investor with a nearly 20% stake in his company, he wants to be sure that Pardus will act in harmony with the strategy laid out by Valeo's board and will leave its self-interest aside.
But Colette Neuville, who has long represented small French shareholders as head of the Association of Minority Shareholders, welcomed the emergence of Eurazeo, Wendel and others as active shareholders.
"Having active shareholders willing to get involved in the management of the company stabilizes the capital of French listed companies. Because of the scattered ownership of French groups, managers had become used to running companies without being accountable. Active shareholders break that habit," she told Dow Jones Newswires.
Last week, Atos shareholders approved Neuville as an independent member of Atos's supervisory board. She had been proposed by Pardus and Centaurus.
Both Wendel and Eurazeo are listed in Paris and have seen their share prices fall this year as the wider market and the value of the assets they invest in have fallen. This makes it even more important for them to generate better returns on their investments.
Wendel switched to shares in listed companies before the credit crunch struck because they had become cheaper than their unlisted counterparts, which had become inflated by low interest rates and good liquidity.
"When we first bought Saint-Gobain stock, it was 30% to 40% cheaper than private assets," Wendel Chief Executive Jean-Bernard Lafonta told the company's annual general meeting last week.
Since then, banks have become reluctant to fund large leveraged buy-out deals because of the credit crunch, but they are still willing to fund acquisitions of publicly quoted assets as the stock can be used as collateral, Paris-based bankers say.
And with shares looking cheap, activist investors could turn their attentions to other French blue-chips. Analysts say the criteria to pique interest are a scattered ownership, undervalued share price, or a collection of assets that would command higher valuations as stand-alone entities.
Media giant Vivendi (12777.FR), construction and roads company Vinci (12548.FR), pharmaceutical group Sanofi-Aventis (SNY), banking group Dexia (DEXB.BT) and telecommunication equipment maker Alcatel-Lucent (ALU.FR) all fit that bill, they say.
-By Nathalie Boschat, Dow Jones Newswires; +33 (0)1 40171740; nathalie.boschat@dowjones.com
(END) Dow Jones Newswires
June 20, 2008 02:30 ET (06:30 GMT)
Copyright (C) 2007-2008 DowJones.com |
| Toutes les actus : Colette Neuville | Thierry Morin | Investissement | Asset | Cash | Colony Capital |
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