French media mogul Arnaud Lagardère amassed more than €200m of debt at his private holding company, more than the current value of his shares in the publicly traded conglomerate that bears his name, according to unpublished accounts seen by the Financial Times.
Through the holding company, Mr Lagardère owns a 7.3 per cent stake in the publicly traded Lagardère, the French media group that includes the Hachette publishing house and Relay newsagents, as well as radio, sports and entertainment assets.
The 58-year-old Mr Lagardère took over the management of the group after his father Jean-Luc died in 2003. Since then, its shares have dropped by a third.
Accounts for 2017 for the holding company, Lagardère Capital & Management, provide the first snapshot in a decade of the scale of Mr Lagardère’s debts.
LC&M had €204m of debt at the end of 2017, according to the accounts, which the company has refused to publish since 2010 when it released the 2009 statement.
For the past few years Lagardère has come under pressure from a London-based activist hedge fund, Amber Capital, which owns a 5 per cent stake in the company. Amber has taken legal action against LC&M to try to force the company to publish its financial accounts, according to two people familiar with the matter. Amber declined to comment.
The debt at LC&M has fallen since 2009 when it was €423m but over the same time period the value of the stake in the publicly traded group has plunged, from about €343m to €185m. That drop in value stems from a falling share price and Mr Lagardère selling down his stake from 9.6 per cent to 7.3 per cent.
Some 99.9 per cent of LC&M’s shares in the public group are pledged as collateral to its lenders, according to Lagardère’s 2018 annual report.
If banks called in their loans, Mr Lagardère’s stake in the company founded by his father could be wiped out — unless he has liquid assets not shown in the accounts.
Mr Lagardère’s financial situation is of importance to minority shareholders in Lagardère because of the way in which the media group is structured as a partnership.
The structure means that despite only owning 7.3 per cent of Lagardère, Mr Lagardère has a tight grip on the group. He cannot be removed by shareholders, but he also has unlimited responsibility for the company’s liabilities.
The large debts mean Mr Lagardère may have different incentives to other shareholders. From 2009-2017, it appears he has received about €360m in dividends and pay from the Lagardère group.
In April, LC&M sold €2m worth of shares of Lagardère, according to French regulatory filings. This came even though its share price was near a two-year low and the company was in the middle of a restructuring. Lagardère explained in May’s annual meeting that the sale was the result of a “long-term agreement” between a bank and LC&M, which suggests that LC&M was selling under pressure from its lenders.
Lagardère and a spokesman for Mr Lagardère did not provide a comment for publication.
Colette Neuville, president of Adam, an advocacy group for minority shareholders, said there seemed to be a “conflict of interest between Arnaud Lagardère’s personal financial situation and that of Lagardère, which means that he may be led to take decisions that aren’t in the best interests of minority shareholders”.
“For example, he distributes too much money as dividends at Lagardère because he relies on these dividends to pay the interest on his debt,” she said, adding: “Shareholders have a right to see Mr Lagardère’s true financial picture, notably his personal wealth and his agreements with the banks. Without this, the unlimited liability he has for Lagardère is illusory.”
Get alerts on Lagardere SCA when a new story is published