While Lafarge and Holcim announced the sale of a portion
of their business to enable their merger, no one seems to have taken into
account the expectations, or rather the concerns, of small shareholders in
France.
They were very vocal at the last Lafarge General Meeting
in June 2014, explaining that they were, for the most part, invested via their
PEA (equity savings plan).
The merger with a Swiss company listed in Zurich
would force them to take the shares out of their PEA.
They would lose their tax
exemption on the dividends and gains made after the merger (they will be exempt
up until the merger date).
They expressed their discontent very clearly,
telling CEO Bruno Lafont that they had supported him during difficult times.
They asked if there wasn't some way for them to stay invested through their PEA
so that they wouldn't have to sell their shares given the current tax situation
in France.
He answered that it wouldn't be possible.
If the merger takes place, there is a very high
probability that Lafarge's small shareholders will sell their shares.
True,
French shareholders only account for 9% of all shareholders according to the
numbers the company provided us with recently (of which 3% are foreigners).
This is how, in a just few years and after a merger with
a Swiss company, the individual shareholders of a company disappear, despite
being an important anchor historically and despite the fact that Lafarge's
chairman consistently promoted a policy of individual shareholding...
There is, however, a way to keep the individual
shareholders in the new group: over 5% of them have to reject the merger.
This
would compel Holcim-Lafarge to keep a Lafarge company listed in Paris with
governance identical to that of any other company listed in France.
This would
enable French shareholders to keep their Lafarge shares in their PEA.
This option has never been presented to the
shareholders, which is understandable from management's standpoint given that
it would be more cumbersome to manage (two listed companies, in Paris and
Zurich).
However, this option would maintain a French anchor with the
possibility, if the merger were to be unsuccessful (over two-thirds of
cross-border mergers fail) to easily return a portion of the shares held by the
Swiss company to the market to "liquidate" the deal.
Global diversification and complementarity are assets to
some, but we are entitled to wonder about the timeliness of this type of deal.
It will lead to the creation of the largest group in the world despite the fact
that the industry is highly local. It is likely more of a financial deal than an
industrial one, probably promoted for the benefit of certain shareholders.
In
addition, the new governance will be "at parity".
As there are many
foreign directors at Lafarge... only a small minority of the new board will be
French nationals.
Many institutional investors and heads of
companies complain daily about the weakness of individual shareholding in
France.
As the individual shareholders of AG said in 2014: "You drop us
when you no longer need us!"
All that is needed is for shareholders, French UCITS and
institutional managers to refuse to contribute their shares to the buyout
offer.
This will enable small French shareholders to remain with Lafarge in
France. Shouldn't we mobilise to make this happen?
Olivier de Guerre
Chairman of PhiTrust Active Investors
