French intrigue
Paris Match is known for its salacious gossip. But the main intrigue in France’s corporate world is currently taking place at the splashy magazine’s publisher Lagardere. Hedge fund Amber Capital and 27% stakeholder Vivendi’s long campaign for governance reforms may finally force some change at the 3 billion euro company. Trading effective control for a big premium could add up to a lucrative double-page spread for eponymous boss Arnaud Lagardere.
Shares in the media-to-travel-retail company jumped 7% on Monday after it confirmed it was “studying” an end to its arcane corporate structure which transforms Arnaud’s 7% stake into an effective blocking majority.
To shareholders, which include Lagardere family friend and LVMH owner Bernard Arnault, turning the conglomerate into a more conventional joint-stock company is a no-brainer. Thanks in part to its messy governance, Lagardere returned 149%, including dividends, since Arnaud became effective boss in March 2003. That’s half the total return on the benchmark STOXX Europe 600 Media index over the same period, according to Refinitiv data.
In return for giving up power, Arnaud might get a slug of new shares potentially giving him a 12% stake in the reformed company, according to a person close to discussions. That would be a lucrative move, particularly if the overhaul hastens a separation of the company’s disparate businesses.
Start with the publishing business, which made almost 250 million euros in operating profit last year. A takeover at 15 times that figure, broadly similar to what Germany’s Bertelsmann has offered for publisher Simon & Schuster, would yield a price of 3.7 billion euros. Then there’s Lagardere’s network of retail travel outlets, which made an operating profit of 152 million euros in 2019, before the pandemic struck. Valued on the same multiple as Swiss rival Dufry, the business might be worth 2.8 billion euros. After deducting net debt of 1.7 billion euros, Lagardere’s two biggest divisions alone might be worth some 4.8 billion euros combined – almost 60% more than its current market value. And that doesn’t include trophy assets such as business newspaper Le Journal du Dimanche.
The presence of billionaires Arnault and Vivendi-owner Vincent Bolloré on the share register means Lagardere would not have to look far for potential buyers for those businesses. Either way, giving up power could bring Arnaud Lagardere a handsome premium.