Bain and Bouygues among final bidders for Engie division
Battle for newly created Equans tests French attitudes to foreign takeovers
The €6bn sale of a little-known business that carries out facilities management and energy-efficiency projects for corporate clients has sparked a politically tinged bidding war that is poised to test France’s attitude towards foreign acquirers.
State-backed energy group Engie is carving out and selling newly created Equans to raise funds as it pivots towards investing more in renewables. The auction attracted seven initial bids but the field has narrowed to three that will submit final offers on Tuesday: US private equity firm Bain, French telecoms-to-construction conglomerate Bouygues and civil engineering firm Eiffage.
Equans’ status as a big employer with more than a third of its 74,000 workers in France has added a layer of political sensitivity to the deal just six months before a presidential election.
So has the presence of Bouygues among the bidders — the group owned by the billionaire Bouygues family has many dealings with the state via its roads and infrastructure businesses, and chair Martin Bouygues is a longtime ally of President Emmanuel Macron.
The state owns a stake of roughly 24 per cent in Engie and will be able to weigh in on the sale in the boardroom, where it holds three of 14 seats.
Some suitors have privately voiced fears that the board will favour the bid from Bouygues, and lobbied for a more structured set-up for the binding offers. They are now set to be unsealed at the same time to avoid any leaks or last-minute adjustments.
“We will be extremely vigilant about the transparency and fairness of the auction process,” Matthias Boyer-Chammard, a managing director at Bain, told Les Echos newspaper.
Some have also recounted discouraging signals in meetings with public officials who expressed a preference for French bidders, according to people familiar with the matter.
Macron’s government has had an uneven approach towards foreign investment. It has trumpeted reforms aimed at making the economy more competitive such as loosening labour rules, and wooed investors at the glitzy annual Choose France conference at the palace of Versailles.
But it also swiftly vetoed Canadian convenience store operator Couche-Tard’s bid for French supermarket group Carrefour in January, on the basis that it was a strategically important company for food supply. That rattled many bankers and business leaders in France who were concerned over the message it sent out.
With €12bn in annual revenue, Equans is made up of myriad smaller businesses that specialise in areas such as installing refrigeration and heating systems or electrifying transport such as tramway lines.
The group is likely to benefit from pandemic stimulus packages, as governments pour funds into environmentally friendly projects. Bidders also see a chance to raise Equans’ operating margins of close to 2 per cent to what would be a best-in-sector 6 per cent, people close to the auction say, once it is no longer submerged within Engie’s sprawling structure.
Several offers from international private equity firms have fallen by the wayside. Apollo and a consortium of CVC and PAI were knocked out in an initial auction round, while Carlyle withdrew its interest later on, leaving only Bain to face French bidders.
Spie, a French engineering group, also stood back in mid-October, saying it had not found the information provided during the due diligence process sufficient for it to progress.
For Bouygues, Equans would mark the group’s biggest purchase in years, and make energy and infrastructure services its biggest division by revenue. Martin Bouygues spent several hours in a meeting with Equans managers in an effort to clinch the deal.
But another deal that Bouygues now has in the works — the merger of its TF1 television broadcaster with smaller French rival M6 — has fuelled further concerns over favouritism towards the conglomerate, according to people familiar with the matter.
The deal is expected to draw close scrutiny from competition regulators. In October, Macron decided not to reappoint French antitrust chief Isabelle de Silva for a second term just as her agency was gearing up to take on the review.
In an interview with the Financial Times last month, De Silva expressed surprise and questioned the “change to the captain” during the sensitive case.
Bouygues, Eiffage and Bain declined to comment. France’s economy ministry and Engie did not return requests for comment.
Engie had sought to stamp out any doubts about the auction by tightening the process around Tuesday’s bids, people close to the matter said.
Equans’ suitors have gone out of their way to woo unions with constant calls and efforts to present their case, according to Sebastien Michel of the CFDT union. “It almost borders on harassment every day,” he said.
Bain has tried to address concerns it is not French enough by teaming up with billionaire Marc Ladreit de Lacharrière, who will take a 20 per cent stake and has promised to act as an “important French anchor”. His investment firm Fimalac would stay on even after Equans goes public in Paris, something Bain has promised within five years, while the deal would be structured so Engie has a 20 per cent stake too.
The US firm, which is seeking to head off fears it could come in with fierce cost-cutting tactics often employed by private equity, has like its rivals promised no forced lay-offs within five years.
It is offering to formalise that promise with unions in a binding contract, echoing a similar move by Eiffage and making its offer, according to Michel, “very, very seductive”.