These three French companies caused some astonishment this year by developing three very different strategies, all of which led to the same conclusion: the transfer of all or part of their business activities.
The Vivendi Board of Directors (with a majority of French members) decided to transfer more than 70% of its business activity without consulting its shareholders, with the goal of “re-centring”, whereas a spin-off would have had the advantage of allowing the shareholders to decide if they wished to tender their shares to the Numéricâble holding company. It is likely that taxation or incentive issues prevailed in this case, even though many shareholders had remained shareholders for many years because of the diversified holding structure of Vivendi.
The Alstom Board of Directors (with a majority of non-French members) decided to transfer 70% of its business activity to General Electric after an agreement had been reached with the shareholders. The company post-deal will be a small player in a very competitive sector, participating in joint ventures with General Electric where GE will have the greatest weight by virtue of its size. Those shareholders who believed in diversification in cyclical businesses are discovering that that model is no longer sustainable.
As for the Lafarge Board of Directors (with a majority of non-French members), it has agreed to present to its shareholders’ General Meeting the offer made by Holcim, an “equal” merger which is in fact a takeover of Lafarge by Holcim, with the new head office located in Switzerland and a majority of non-French directors in the new group. The shareholders who supported Lafarge’s development, including in its most difficult moments, decided on this deal, the need for a merger in this sector appearing more as a marketing approach than as a real necessity given the characteristics of this sector.
These three approaches are in fact quite similar because in all three deals, the only variable governing these decisions was financial, whatever the management teams might say. It is striking that the question of common sense or of the company’s “mission” disappears only to be replaced by the short-term interests of certain shareholders…and the need to reduce risk for those same shareholders. The business plan becomes secondary to a financial choice which is only imposed because there is no longer a benchmark investor or investors supporting the development of a French business plan over the long term. At a time when we are increasingly aware of the consequences of accelerated de-industrialisation, the absence of private or institutional investors who, as shareholders, could be an opposing force (it is possible to control a listed company with less than 5% of its share capital…) creates a vacuum in our economic area.
We should not be surprised if, in a few years, we have a rude awakening because our flagship companies have become the property of foreign companies! Some will argue that a minority shareholder “can do nothing”, and that his only interest is a financial one. But isn’t this a short-term view that ignores the fact that the minority shareholders of these companies have remained so for years against all odds, because they believed in a project led by men and women of quality?
Being a shareholder is not only about getting your due (dividends, capital gains) but also about your obligation as a co-owner who ensures that a long-term strategy is in place so that all parts of the company may grow. This includes forming alliances that allow you to define your own strategy independently. It is our responsibility to remind those we elect as board members of this fact, since they have an obligation to act with the company’s interests and those of all its parts at heart; this includes allowing for its growth.
As minority shareholders, we can unite to act for this purpose, and it is urgent that we do so if we do not want to mourn for the “paradise lost” of our greatest companies in a few years.
Olivier de Guerre
Chairman of PhiTrust Active Investors