Lafarge and Holcim
announced that the latter was launching its public exchange offer on the shares
of Lafarge and that both companies hoped that the Lafarge shareholders would
accept the bid. This announcement ended a year which strangely resembles
Aesop's fable in which the frog considers itself stronger than the ox! After
Holcim appointed a new chairman, the planned merger of equals in which Bruno
Lafont would become manager of the new entity turned into a takeover by Holcim
on terms that would not have been accepted by a large proportion of the shareholders
a year earlier!
Because in the
enthusiasm, part of the assets had been sold, and it is astonishing that very
few analysts were surprised by the few synergies foreseeable in an industry in
which it is hard to optimise plants by alliances which are impossible from a
purely technical viewpoint. The argument of complementarity was apparently
sufficient to obtain the backing of all the investors, without even considering
whether an alliance with Cemex, with a stronger presence in Latin America than
Holcim, would not be "smarter".
Albert Frère, one of
the two main shareholders, apparently himself promoted this merger, probably to
be able to gradually pull out of a major investment, because it is hard for him
to sell his stake in Lafarge without a risk. A merger has the advantage of a
dilution, and this is probably also the thinking of Holcim's main shareholder,
and it was supported by the Egyptian Sawiri family, the other main shareholder,
possibly because it hopes to become de
facto the main shareholder of Lafarge Holcim.
The fact that the new
governance is mostly that of Holcim shareholders, that the position of Holcim
vice-chairman is not proposed to Bruno Lafont with powers to convene the Board
or represent the chairman whenever the chairman is absent, clearly shows the
imbalance of this "merger of equals".
The fact that, at the
same time, the choice of Switzerland for the head office obliges all the small
French shareholders to sell their shares, because they cannot own shares which
are not in the European Union, apparently did not count for much in the Board
of Directors' decisions, which in our opinion raises a fundamental question
regarding the representativeness of the Boards of Directors of large listed
companies.
The question does not
concern the public exchange offer but clearly a takeover bid in disguise,
without paying a premium for the acquisition of control by the firm now
controlling Lafarge. And very few investors, including French investors,
opposed this even though Lafarge is a perfectly viable and profitable company
with growth prospects even though some markets, especially in the Middle East,
are admittedly complex in our modern world.
It is a strange
paradox that everyone complains about the loss of influence of French
shareholders and no one can react to such a deal, because the obsession with
short-term profitability means it is no longer possible to take the time to
build and develop a strategy. It must be said that Lafarge's M&A deals and
heavy debt burden had led shareholders to accept deals without having the
necessary capital, which undermined this magnificent firm, as two shareholders
took control surreptitiously, thanks to double voting rights!
This takeover is
undoubtedly the result of an uncontrolled growth strategy implemented in the
past few years with the active support of investors having above all a
financial perspective. The cruel lack of French investors in the equity of our
finest companies and the governance that it implies is the direct result of the
fiscal and accounting decisions made by successive governments for some years
now, and the concentration of assets in the hands of multinational investment
management companies for which France and its companies are now merely a
sub-segment of a European allocation, but no longer an asset in its own right.
Lyon, Lille and
Bordeaux were active regional stock exchanges in their time, and Paris will
soon be just a small European stock exchange if we do not all react collectively
to encourage French investors to invest in blue-chip French companies.
The fiscal decisions
of the next governments will be a clear signal regarding the priority given to
French companies, but not merely that. The decisions of boards of directors and
the strategies implemented can only arouse the mistrust of investors and
employees if these decisions entail further acquisitions resulting in the
disappearance of head offices in France. Because as well as decision-making
centres there are those companies needed for taking action (strategic
consulting firms, legal firms, banks, etc.), and these players will be obliged
to move offshore to follow their main clients. France's loss of influence could
thus easily gather momentum, and the directors of the companies in question
will not be able to shelter behind strategic or financial arguments alone to
justify these decisions.
We are accountable to
future generations for our decisions, and it could be time that we remember this!
Olivier de Guerre
PhiTrust Active
Investors
