By calling on Thursday the two heavyweights Nicolas Sarkozy and Guillaume Pepy, close to the interests of his first shareholder the Qatari fund, to the control bodies of the group he directs, Arnaud Lagardere is preparing to face his rival Amber Capital who is lobbying for governance changes.
On the sidelines of the publication of its 2019 results, the publishing and distribution group Lagardere announced Thursday the “unanimous” cooptation of the former President of the Republic and the former boss of the SNCF to the council monitoring.
If it does not surprise because these two names had been mentioned in the press, the maneuver may be surprising because it occurs before the general meeting of shareholders which will have to ratify these appointments, and because it results in the resignation, not justified, two members of the board: its ex-president since December Xavier de Sarrau who could stay until 2022, and Francois David whose mandate expired in 2020.
In a partnership limited by shares (SCA) like the Lagardere group, the supervisory board, emanation of the shareholders, oversees the strategy implemented by the general partner Arnaud Lagardere, a third shareholder with 7.33% of the shares and 10% of the voting rights.
However, the policy of the leader is criticized by the activist fund Amber Capital, now the second shareholder with 10.58% of the shares. After missing in 2018 the opportunity to elect representatives to the supervisory board, prevented by Qatar’s last-minute rallying to Arnaud Lagardere, Amber intends to repeat this year.
According to a source familiar with the matter, the appointment of Nicolas Sarkozy, intimate of Arnaud Lagardere and very close to Qatar (today 13% of the shares and 20% of the voting rights), and of Guillaume Pepy, also very involved in the economic relations with the State of the Arabian Peninsula, aims to close ranks around the only son of Jean-Luc Lagardere before the general assembly.
– The battle over LC&M accounts –
In addition to criticism of the “scrapping” of group assets, Amber obtained in October from the Paris Commercial Court the publication of the accounts of the holding company Lagardere Capital & Management (LC&M), which holds the personal participation of Arnaud Lagardere in the group. He particularly wishes to check his debt level, while a general partner is responsible indefinitely for the debts of the company on his own property, and questions the use and destination of the funds paid by the Lagardere group to LC&M.
Arnaud Lagardere did not comply, showing his accounts only to a journalist from Le Point during an interview in January, and appealed the decision. A hearing is scheduled for March. He also immediately counterattacked, accusing the activist fund of carrying out a “destabilization campaign” and claiming 84 million euros in compensation.
Now refocused on publishing and distribution in transport locations, the Lagardere group generated revenue of 7.2 billion euros in 2019, up 5%, but 400 million euros lower than consensus of Bloomberg analysts.
Its two main retained activities increased, excluding currency and scope effects, to 2.8% for publishing (Hachette) and 6.3% for distribution activities, but revenues from other activities (including media Paris Match, JDD, Europe 1, Virgin Radio, RFM, Elle license, and entertainment activities including performance halls) fell by 4.2%.
The group recorded a net loss of 15 million euros over the year, due to a significant depreciation affecting its subsidiary Lagardere Sports, a majority share of which must be sold for 80 million euros to the HIG Capital fund. Excluding non-recurring and non-operational items, adjusted net income amounted to 200 million euros, stable over one year.
Asked at a conference with analysts, Arnaud Lagardere warned that he will no longer indicate plans for divestiture in advance.
The group forecasts for 2020 an increase in its operating profit between 4% and 6% at constant exchange rates and excluding the acquisition of the Belgian International Duty-Free (IDF) and the consequences of the coronavirus, estimated in the first quarter at 20 million euros, an amount that the group intends to make up for half of during the year thanks to “cost optimization”.