France Inc. Racks Up $45 Billion of Deals in October Spree

(Bloomberg) -- French companies have been on an foreign acquisition tear in recent weeks, offering a rare bright spot for bankers amid a weak global dealmaking environment.

Peugeot owner PSA Group announced Thursday it’s in talks to combine with Italian-American rival Fiat Chrysler Automobiles NV, capping the busiest month for acquisitions by French companies in over a decade. Companies in France announced nearly $45 billion of purchases in October, more than double a year earlier, according to data compiled by Bloomberg.

While traditionally strong M&A markets like the U.K. face increased uncertainty from upcoming general elections, France has been stable with former banker Emmanuel Macron just halfway through his five-year term as president. French companies have been taking an “offensive approach” to acquisitions, helped by the business-friendly political environment, according to Jean-Baptiste Charlet, co-head of French investment banking at Morgan Stanley.

“Large French corporations have lately shown increasing ambition and are eager to develop and grow their presence,” Charlet said. “In most transactions we’ve seen lately, the French party has been the one initiating the deal.”

Just this week, luxury giant LVMH made a $14.5 billion offer for American jeweler Tiffany & Co. in what would be the luxury industry’s biggest-ever acquisition. French content producer Banijay Group announced the acquisition of Endemol Shine Group, a Dutch rival backed by Walt Disney Co., in a deal said to be valued at about $2 billion. French capital markets were also busy, with technology services provider Atos SE raising 1.3 billion euros ($1.5 billion) in a placement of Worldline SA shares and a related exchangeable bond sale.

“Deal activity is very resilient at the moment in France,” said Cyrille Perard, a managing director at Perella Weinberg Partners, which advised PSA’s board on the Fiat Chrysler deal. “It certainly makes the French M&A market stand out in comparison to other markets in continental Europe.”

France’s economy grew faster than expected in the third quarter, and October numbers show a rebound in services and solid consumer sentiment at a time when other European economies are struggling with global trade difficulties. Consumer companies Hermes International and LVMH reported strong results in the latest quarter, helped by Asian sales, while pharmaceutical giant Sanofi beat estimates thanks to strong demand for its eczema treatment.

‘Great Environment’

“The large corporates in France are still relatively healthy, so globally France remains a strong market for M&A,” Perard said. “The debt market and cash availability remain stronger than ever, with very low interest rates -- which is a great environment for dealmaking.”

Tiremaker Michelin and autonomous driving technology supplier Valeo SA both stuck to their annual guidance even as global vehicle markets have turned weaker than expected. Cosmetics maker L’Oreal SA also struck an optimistic tone after its latest results, saying strong demand from Asia and new product launches will help support continued growth next year.

Some of the recent transactions were long-awaited deals that finally came to fruition, said Marc Pandraud, vice chairman of investment banking for Europe, the Middle East and Africa at JPMorgan Chase & Co. Consolidation is “very much” needed in the automotive sector, where companies can share capital expenditures and research costs, he said.

The need to bulk up will continue to drive French dealmaking, as the country seeks to create national champions in industries that are still fragmented, according to Perella’s Perard.

“The focus is no longer on consolidation for growth,” he said. “Big companies in France want to consolidate to be big enough and have the tools in place against macroeconomic changes.”

--With assistance from Eric Pfanner and Michael Hytha.

To contact the reporter on this story: Myriam Balezou in London at mbalezou@bloomberg.net

To contact the editors responsible for this story: Dinesh Nair at dnair5@bloomberg.net, Ben Scent, John Lauerman

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