France to Spend $1.3 Billion to Guarantee Rights at Renault

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Renault SA
Workers make quality control checks on a completed Renault Captur compact sport-utility vehicles (SUV) following assembly at the Renault SA automobile plant in Valladolid, Spain. Photographer: Angel Navarrete/Bloomberg

The French state will spend as much as 1.23 billion euros ($1.3 billion) to raise its stake in Renault SA and maintain its influence in the carmaker.

The French treasury bought 9.6 million Renault shares on the market yesterday and has given a bank a mandate to acquire 4.4 million more, the Industry Ministry said in a statement Wednesday. The move will cost between 814 million euros and 1.23 billion euros and safeguard extra voting rights the government and other long-term shareholders are due to receive.

The government wants to ensure it wins a shareholder vote on April 30 that will determine whether any investor who owns the stock for more than two years can get double voting rights. The state backs the shift, allowed in French law since 2014, which will give it and other long-term shareholders more power. France is the biggest owner of stock in Renault, followed by Japanese auto-manufacturing partner Nissan Motor Co.

“This measure is aimed at protecting the current Renault-Nissan alliance structure against shareholder activism,” said Philippe Houchois, a London-based auto analyst at UBS AG.

The state’s holding will rise to 19.7 percent of Renault and 23.2 percent of its voting rights, from 15 percent and 17.7 percent before yesterday’s purchases, ministry officials said on a conference call. Because of its close ties to Renault, which is based in the Paris suburb of Boulougne-Billancourt, Nissan doesn’t exercise its voting rights, leaving the government with the main influence at the French company, they said.

Stock Gains

Renault rose as much as 0.7 percent, reversing a decline earlier in the day, and was trading up 0.1 percent at 85.36 euros as of 11:50 a.m. in Paris. The stock has gained 41 percent this year, valuing the carmaker at 25.2 billion euros.

A Renault spokesman declined to comment on Wednesday.

“This operation conforms perfectly to the new doctrine of state shareholdings, which is that of active management of the portfolio,” the Industry Ministry said. “Its aim is to protect the state’s weight in the governance of the company and to defend its long-term interests.”

France aims to “promote capitalism of progress, of the long term at the service of employees and the development of companies,” Industry Minister Emmanuel Macron said in the statement. “It shows the state is both an investor and a defender of the general interest.”

Maintaining Stake

The government intends to sell the newly purchased shares after the annual-meeting vote and has acquired options to protect the value of the stock. The move is “in no case” intended to lead to a long-term increase in the state’s stake in Renault, the Industry Ministry said.

“As a former Rothschild banker, Macron is a master at this kind of deal, and he realized he could do this at almost no cost to the state,” said Alexis Albert, a Paris-based auto analyst at MainFirst Bank AG. “I’m pretty sure they’ve already prepared their exit with equity options.”

Renault and Nissan Motor Co. have been in a cross-shareholding partnership since 1999 and coordinate strategy on models, marketing and technology. Under the alliance, Renault owns 43.4 percent of Yokohama-based Nissan, which in turn holds 15 percent of Renault.

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