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Lagardere's American Raider Wyser-Pratte Takes on CEO Arnaud in Board Bid

U.S. investor Guy Wyser-Pratte will ask Lagardere SCA shareholders to name him to the board and take on Chief Executive Officer Arnaud Lagardere over the company’s corporate structure.

Shareholders in France’s largest publisher will vote tomorrow on whether to appoint Wyser-Pratte, who says he owns a 0.53 percent stake, to the board. The investor is taking on Arnaud Lagardere, who has vowed to protect the corporate structure left behind by his father Jean-Luc Lagardere.

Wyser-Pratte wants to change the company’s status as a “societe en commandite par actions,” a stock partnership that gives a few general partners more power than other shareholders. Lagardere says the structure helps the general partners to run the company in a “responsible and careful” manner. The general partners are Arnaud Lagardere and Arco, a company he runs.

“In the past, I think investors would buy into the SCA to buy into Jean-Luc’s way of doing business,” Fabrice Remon, managing partner at shareholder advisory firm Deminor, said by phone. “I’m not sure today investors want to buy into Arnaud’s way of doing business” in the same way, he said.

Arnaud Lagardere owns 9.6 percent of the company. He’s also the CEO and chairman of Arco. AllianceBernstein Holding LP owns 10 percent of Lagardere, while the Qatar Investment Authority controls 6.6 percent, according to data compiled by Bloomberg.

Wyser-Pratte’s Record

Wyser-Pratte, 69, has been an activist investor in Europe for more than a decade, buying up small chunks of companies he considers ripe for a change in strategy or management.

At German robot-maker Kuka AG, CEO Horst Kayser and CFO Matthias Rapp stepped down in 2009 after pressure from Wyser- Pratte and other large shareholders to change strategy. TUI AG, owner of Europe’s biggest tour operator, decided to sell off part of its Hapag-Lloyd shipping unit last year after Wyser- Pratte and other investors demanded the move.

An SCA has two types of shareholders: general partners with unlimited liability for debts and whose voting rights are not freely transferable, with veto power over some shareholder decisions, and limited partners whose liability is limited to their initial investment.

In a letter to shareholders, Lagardere this month said the SCA structure allows the “total separation of the powers” of the general partners and those of the supervisory board.

‘Nonsense Stops’

“When I get on the board, the nonsense stops,” Wyser- Pratte said in a phone interview. The investor, who is referred to by Lagardere as an “American raider,” has pledged to increase returns for shareholders by starting a strategic review of the company. Seven of the 15 board seats are up for election at the AGM.

Wyser-Pratte will need a majority of votes cast at the AGM to gain a board seat. He has a chance of winning support, said Conor O’Shea, an analyst at Kepler Capital Markets in Paris. “If you’re a minority investor, why would you vote against him getting on the board and shaking things up?”

Lagardere has said that the “recommendations and generally hostile intrusion of Guy Wyser-Pratte do not represent a constructive dialogue with the stakeholders.”

In an April 21 statement, Wyser-Pratte said Arnaud Lagardere had begun a “desperate attempt to discredit him.” On April 23, the company said it asked French market regulators to examine Wyser-Pratte’s campaign. He denied wrongdoing.

In addition to Lagardere, two of 84 French companies with more than 3 billion euros ($4 billion) in market value are also structured as SCAs, according to shareholder advisory firm RiskMetrics Group: tiremaker SCA Compagnie Generale des Etablissements Michelin and luxury handbag maker Hermes International SCA.

Stock Drop

“In a society obsessed by speed, the SCA is the perfect tool to fight against the tyranny of the short term” because it allows the general partners to develop a long-term strategy, Fabrice Marchisio, a lawyer at Paris law firm Cotty Vivant Marchisio & Lauzeral, said in an e-mail.

Lagardere’s stock performance doesn’t speak in management’s favor. The shares have dropped 45 percent in the last five years, compared with a decline of 4 percent at German publisher Axel Springer AG, a 17 percent slump at U.S. publisher Meredith Corp. and an increase of 63 percent at U.K. rival Pearson Plc.

The shares’ underperformance “has to do mostly with the conglomerate structure, and some structural threats for some of their businesses” such as advertising-dependent media, said Joris Franssen, who helps manage about 600 million euros at Kempen & Co. NV in Amsterdam, including Lagardere shares.

Shedding Stakes

Arnaud Lagardere has made shrinking the range of businesses a priority this year. On April 15, the company began a process to sell its 20 percent stake in Canal Plus France, the biggest French pay-TV operator. He has also pledged to dispose of a 7.5 percent stake in European Aeronautic, Defence & Space Co., the maker of Airbus jets, and use the proceeds to focus on the media business. EADS is the company’s only defense asset.

Shareholder advisory firms, which give advice to institutional investors on corporate resolutions, have issued different opinions on Wyser-Pratte’s efforts.

Glass Lewis & Co. recommends clients vote against Wyser- Pratte’s board candidacy, and for his proposal to alter the privileges of the general partners. RiskMetrics Group advised clients to vote for the candidacy.

It’s hard to predict whether Wyser-Pratte will succeed in changing Lagardere’s structure, Colette Neuville, the president of the Association for the Defense of Minority Shareholders, said by phone.

“He alone can’t produce a revolution,” she said. “But he can provoke a discussion.”

To contact the reporter on this story: Matthew Campbell in London at mcampbell39@bloomberg.net.

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