Amber Capital makes move to oust Lagardère board
Activist presses for reforms at underperforming French media group
Activist investor Amber Capital is seeking to oust the board of Lagardère at its forthcoming annual shareholder meeting, the latest stage in its long-running campaign for change at the underperforming family-controlled media group.
Amber, which has been increasing its position in Lagardère and is now the group’s largest shareholder with a 16.4 per cent stake, unveiled its board proposal as part of a 49-page presentation. It argued that poor governance had allowed heir and managing partner Arnaud Lagardère to destroy shareholder value for years with no consequences for his position.
“The current board has failed its shareholders,” said Amber’s founder Joseph Oughourlian. “We will start by changing the board and implement change from there.”
To that end, the activist fund has proposed 16 resolutions to put forward a slate of eight new board members at the AGM in May. It will not oppose the appointment of two new members that Lagardère has proposed. They are former French president Nicolas Sarkozy, a family friend of Mr Lagardère and of his late father Jean-Luc Lagardère, and Guillaume Pepy, who used to run SNCF, France’s state-owned rail company.
Amber has selected Patrick Sayer, the well-respected former CEO of listed private equity company Eurazeo, as its candidate for board chairman.
The move represents an escalation in the conflict that has raged between Lagardère and Amber since it first took a stake in 2016. It also comes as the group’s businesses, which include publisher Hachette, the Relay chain of travel retail stores and Paris Match magazine, are being hit by the economic shock of the coronavirus pandemic. This prompted Lagardère to suspend its annual profit guidance on Wednesday and cut its dividend by 30 per cent.
Lagardère shares are down 61 per cent in the past year, compared with a 19 per cent decline in France’s blue-chip CAC 40 index.
A spokesman for Lagardère declined to comment on Amber’s board proposals. In the past, Lagardère has accused Amber of seeking to destabilise the company and its leadership, and has sued the hedge fund for defamation in the French courts.
Whether Amber’s campaign will be successful at the May 5 annual meeting will depend on whether other large shareholders, including the Qatar Investment Authority, can be rallied to the cause. Other activists have taken aim at Lagardère in the past but their efforts failed in large part because of the grip that the company’s structure gives to Mr Lagardère.
Although he owns only 7.5 per cent of the company, Mr Lagardère controls the group though an unconventional structure known as a société en commandite par actions, which is a hybrid between a partnership and a limited liability company. In practice this means that the shareholders — or limited partners — cannot remove the general partner — Mr Lagardère — as they could in a normal company.
Amber Capital has argued that the structure has meant that there are few outside checks on Mr Lagardere’s power and no consequences for strategic mis-steps and poor capital allocation.
Amber is hoping to change that by replacing the board and then enacting a far-reaching turnround plan that would eliminate the commandite structure and get rid of Mr Lagardère and his longstanding lieutenants. Amber also wants to cut management costs so as to invest more in publishing and travel retail.
Two years ago Amber tried unsuccessfully to nominate two members to
Lagardère's board at its shareholder meeting, but QIA and other investors voted against its proposals.
So far the fund has lost money on its investment in Lagardère. It bought most of its shares when the price was around €18 to €20 per share, compared to the current price of €9.50.