French protectionism is being challenged by a new wave of activists
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France is famous for many things — its cuisine, luxury goods and art de vivre. In the corporate world, however, it has a reputation for one reflex that it is still struggling to shake off: protectionism.
The textbook example of this is PepsiCo’s interest in French yoghurt maker Danone in 2005, which led Dominique de Villepin, then French prime minister, to warn the US company to stay away from a corporate “crown jewel”.
PepsiCo retreated. Now the country’s reputation for protecting its corporates is being tested anew by an increased wave of activity from a crop of often foreign activist investors on French soil.
Activist hedge funds like Elliott Management and Amber Capital are demanding change at some of the country's best-known companies, including drinks maker Pernod Ricard, utility company Suez, and media group Lagardère.
A decade ago it would have been almost unheard of to see foreign activist investors on a French company’s shareholder register. This was a country, after all, where local raiders such as Vincent Bolloré and Albert Frère had roamed for years.
This year, five large French companies have faced activist campaigns, according to Richard Thomas, the Paris-based American who runs the shareholder advisory group at Lazard.
“The old style of activism in France was slow-build, more private and centred around the AGM votes,” Thomas told the FT. “That has flipped on its head. Now the strategy is more US-style: more aggressive, less patient and more public.”
Elliott’s European arm, which is run by founder Paul Singer’s son Gordon Singer, has been busy across the continent and built up stakes in French, German and Italian companies. Other US funds like Dan Loeb’s Third Point have followed suit.
Outside investors have been quick to criticise corporate governance in France, where companies often have high levels of family ownership, and long-term investors benefit from laws that give them double voting rights.
French politicians are trying to resist the onslaught of activist investors. Finance minister Bruno Le Maire said back in April that he was looking for ways to allow French companies to resist activist investors. Then last month a cross-party government commission published recommendations on how to prevent short-sellers and activists from unfairly destabilising French corporates.
One thing is clear: trying to freeze out activists may not sit well with France’s desire to show that Paris can serve as a European financial hub after Brexit. But DD believes that the landscape has shifted. Expect to see more battles.