LVMH’s billionaire owner Bernard Arnault has agreed to buy 25 per cent of Arnaud Lagardère’s holding company, coming to the aid of his fellow French businessman weeks after he saw off a challenge from an activist investor.
Through the holding company, Mr Lagardère owns a 7.3 per cent stake in the publicly traded Lagardère, the media group founded by his father and whose biggest businesses are book publisher Hachette and a unit that operates retail outlets in airports and transport stations.
Mr Lagardère has been battling to keep control over the company as the activist hedge fund Amber Capital attacked his record of underperformance and his creditors pressured him to pay back heavy personal debts. The unexpected arrival of Mr Arnault assists Mr Lagardère on both fronts.
In a joint statement on Monday, Mr Arnault and Mr Lagardère said shares would be issued in Lagardère Capital & Management so as to “strengthen its structure and financial capacity”. The investment was worth about €100m, according to two people close to the matter.
Mr Arnault’s help may be worth much more than that to Mr Lagardère as it neutralises a line of attack that Amber used against the CEO, namely that his personal debts threatened his ability to lead the company.
Mr Lagardère has borrowed against the value of his stake, and LCM owes as much as €200m to Crédit Agricole.
Amber, which is Lagardère’s biggest shareholder with an 18 per cent stake, has argued that Mr Lagardère’s financial situation is important because of the way in which the media group is structured as a partnership.
Known as a société en commandité par actions, this means that despite owning just 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 joint statement did not mention LCM’s debts. But before the recent shareholder meeting in which Amber tried and failed to replace the board, people familiar with the situation said Mr Lagardère might be willing to negotiate ending the commandité structure and use the proceeds to pay down his debts.
That scenario is now less likely given that LCM will receive cash that will be used to pay down the Crédit Agricole loan, the second person close to the matter said.
Mr Arnault’s investment will also help Mr Lagardère protect his company from the other French billionaire whom he recently convinced to invest to rally votes against Amber.
Vivendi, which is controlled by renowned corporate raider Vincent Bolloré, bought an 11 per cent stake in April and backed Mr Lagardère at the shareholder vote.
Vivendi has since raised its stake to 16.5 per cent. Analysts have speculated that Mr Bolloré might have his eyes on Hachette, since Vivendi is in the publishing business.
The ties between the Lagardère and Arnault families go back decades. Mr Arnault used to play tennis with Lagardère’s father, Jean-Luc, and sat on Lagardere’s board from 2004 to 2012. Arnaud Lagardère was on the LVMH board from 2003 to 2009.
“I have welcomed Arnaud Lagardère’s proposal to join forces with him,” said Mr Arnault in a statement. “My friendship with Jean-Luc Lagardère brought our families together, and I have the utmost respect for the group that he built.”
Shares in Lagardère jumped 13 per cent by mid-day in Paris.
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