Photographer: Balint Porneczi/Bloomberg
Finance

Socialist France's Undercover Capitalist

Regis Turrini steers the 'sovereign hedge fund' that owns the state's shares in Renault, Airbus, and EDF

Regis Turrini works for Europe's most prominent Socialist state. But he's really a covert capitalist.

Since September, the former deals specialist from Vivendi SA has headed a French government fund that oversees $130 billion in shares in 74 companies. While serving his socialist masters, Turrini says his goal is to make the fund less of a cudgel for implementing government policies and more like any other investor, managing his holdings to maximize returns.

"I do my best to bring a bit of Henry Kravis and a bit of Warren Buffett to my job," Turrini said over coffee in a classic Left Bank café, where he often holds meetings to escape the fund's charmless offices. "It's about finding the right mix of modernity and wisdom."

That means convincing his bosses -- France's ministers of finance and economy -- that the state is stronger when it refrains from interfering in day-to-day management of companies and focuses instead on financial goals.

The fund, the Agence des Participations de l'Etat, owns shares in warship builder DCNS SA, the national lottery, and 13 blue-chip companies such as automaker Renault SA, aviation giant Airbus Group and energy provider Electricite de France SA. Though he accepts that he can’t abandon APE’s core mission of maintaining France's energy and transport sectors, he insists that doesn't have to conflict with the aims of a strategic investor.

A key task for Turrini will be selling 4 billion euros ($4.4 billion) in stock by yearend to pay down France's debt, which he is required to do under the 2015 budget law. He's also central to a reshuffling of France's nuclear industry, overseeing a plan that could see EDF take over some parts of reactor-maker Areva SA, where losses last year widened to 4.8 billion euros from 494 million euros in 2013.

The former globetrotting financier, accustomed to tense negotiations from Brazil to Morocco during his decade as a top strategist at Vivendi, now finds himself more often jousting with civil servants and their political overseers. He has sparred particularly vigorously with Energy Minister Segolene Royal, whose off-the-cuff comments on EDF and Areva have been blamed for hammering the stocks of both companies.

Regis Turrini
Regis Turrini
Bernard Sidler/French Finance Ministry via Bloomberg

"It doesn't matter where the pressure comes from -- he can handle it," said Jean-Bernard Levy, Turrini's former boss at Vivendi, who now heads EDF. "Regis always keeps his cool."

Turrini has some of France's most influential CEOs -- like Levy -- on his side, as well as an extensive address book of bankers. He worked with Deutsche Bank this month to secretly purchase shares in a complex financial maneuver that will likely end up doubling the fund's voting rights at Renault.

"I told him 'Congratulations, you just invented the sovereign hedge fund'," said Bernard Mourad, a former Morgan Stanley banker now working with telecom tycoon Patrick Drahi, who has sat across the table from Turrini negotiating deals for more than a decade. "Why should the state have less sophisticated financial instruments than the private players on the market?"

Recruited by former Economy Minister Arnaud Montebourg, Turrini now teams up with Montebourg's successor, Emmanuel Macron, a Rothschild & Cie banker-turned-minister who shares the vision of France as an activist investor. Macron and Turrini together orchestrated the Renault operation and have shored up the fund's influence at other APE companies.

The father of three, who matches his suit with his scarf and wears dandy-style high-cut buckled shoes, has made it into France's business elite without being a socialite. His modus operandi is more about discreetly getting the work done than flashing his face to claim results.

"Listen a lot, talk little: that's Regis," Mourad said.

Turrini graduated in 1989 from ENA, the administration school that has groomed France's elite for generations. He later earned a law degree and worked as an attorney for several years before landing at investment bank Arjil & Associes in Paris.

At Vivendi, which Turrini joined in 2003, he helped unwind some 33 billion euros in debt left over from years of frantic deal-making. Former colleagues also say Turrini played a key role in seeing the company through myriad asset sales and takeovers to refocus its multi-billion-euro portfolio of businesses on media.

"There is a continuity between this role and my previous M&A-focused work," Turrini said. "We're shareholders, and we make sure we create value."

It took a decade of economic stagnation to wake up France's asset management. The state's shareholding control was taken out of the dirigiste hands of the Treasury when APE was founded in 2004.

The agency struggled to gain its independence, but Turrini has helped loosen the state's grip. In November, he worked with Economy Minister Macron to help Airbus sell off part of its stake in Dassault Aviation SA, the maker of Rafale fighter jets, considered a strategic French industry. With his deep network of contacts among bankers, Turrini was instrumental in persuading officials close to President Francois Hollande that there was sufficient investor interest in Dassault for a share sale to succeed.

Still, France's government hasn't entirely sworn off its meddling. This year Macron blocked the sale of Dailymotion SA to a Chinese buyer, calling the Paris-based alternative to YouTube a strategic asset. More recently, Macron sought to be involved in Nokia Oyj's takeover of Alcatel-Lucent SA in the name of protecting jobs and research in France.

"Investors abroad don't always understand the difference between the French state as a shareholder and the state as an authority or a regulator," Turrini said.

Turrini doesn't expect to remain at the APE after Hollande's term ends in 2017. But he says that's long enough to convince the global financial community that France can be a profitable place to do business.

"What I am working on," he said, "is restoring investor confidence."

 

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