July 29, 2021

French capitalism shaken by activist funds

Pernod Ricard, Suez, Lagardère, Scor: from month to month, the list of large French companies put under pressure by activist funds is growing. On August 25, the Reuters agency revealed that the American Third Point, one of these star players, had just entered the capital of the optical leader EssilorLuxottica.

These shareholders are called “activists” because they campaign with managers and councils to apply their recommendations, new governance, share buybacks, or even the sale of the company. As many financiers prefer, initially, to engage in these discussions behind the closed doors of the board of directors, their presence is not always known to the public.

According to several sources, the British TCI – another notorious troublemaker – thus discreetly holds some 2% of Vinci’s capital. At this stage, the fund created by Chris Hohn behaves like a passive investor. But Xavier Huillard, the CEO of the infrastructure specialist, is warned: the financier had been a Safran shareholder for years when the engine manufacturer’s plan to buy Zodiac Aerospace, announced in January 2017, unleashed its fury and a Homeric battle ensued, at the end of which Safran finally took over the aeronautical equipment manufacturer but on more favorable terms.

“There is progress to be made in France”

The bosses, one suspects it, hate these clashes with rough investors, sometimes aggressive, whose first demand is very often to… change the captain. However, is there a risk of destabilizing the tricolor flagships? Should we hinder these interventionist actors? These are the questions to which Eric Woerth, the president of the finance committee of the National Assembly, wanted to answer through a parliamentary “flash” mission on shareholder activism, the conclusions of which were to be presented on Wednesday 2 October.

“In terms of governance, there is room for improvement in France”, recognizes Mr. Woerth, “The culture of dormant shareholders and boards of directors whose members have known each other for a long time has produced a certain languor. ” And add : “It is natural for investors to ask questions about the use of their money. That some come out of the trenches is rather good but there is an additional regulation to be implemented ” to limit certain excesses.

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