Macron Reforms Draw Interest From Buyout Firms Eyeing Takeovers

(Bloomberg) -- France is poised to become a more attractive market for private-equity firms next year as lawmakers in Paris consider amending takeover legislation that would make it easier for buyers to force out minority shareholders.

The proposed Pacte bill, which would see the squeeze-out threshold lowered to 90 percent from 95 percent among a host of wider measures affecting businesses, won preliminary backing in October and is currently being reviewed by the senate.

Macron Reforms Draw Interest From Buyout Firms Eyeing Takeovers

“The draft law will encourage public-to-private transactions in France,” Gaetan Gianasso, a partner at Latham & Watkins LLP, said in an interview. “Some of our clients have been following the debate and have already approached us about potential take-private deals.”

The new legislation is part of a package of sweeping changes proposed by President Emmanuel Macron to revive the French economy by loosening labor rules and encouraging risk taking and investment. Reducing the squeeze-out threshold would bring France in line with other major European markets including Germany and the U.K., which allow a stakeholder with at least 90 percent of the shares to force the remaining investors to sell.

Over the past five years, only 10 companies have been delisted in France by private equity firms in takeovers worth about $2.9 billion, compared with about 22 U.K. deals valued at almost $14 billion or 16 German transactions of more $11 billion, according to data compiled by Bloomberg.

Lowering the threshold could discourage aggressive investors -- namely hedge funds or activists -- from buying just a 5 percent stake to force acquirers to increase their offer price and meet the 95 percent bar.

Buyout firms globally -- flush with more than $1 trillion in their warchests for new investments -- are typically the primary drivers of take-private transactions, though the new legislation would also make 100 percent-acquisitions by companies easier in France.

Such transactions underway right now include the pursuit of French insurer April SA
by CVC Capital Partners and BC Partners: the two private equity firms are among suitors who’ve submitted final bids, people familiar with the matter said last month.

“There has been a strong will from Macron and his government to facilitate business,” Gianasso said. “This is a further positive signal to markets and investors that France is open for business.”

Still, the law isn’t likely to be passed in France before spring, Philippe Lorentz, a partner at August Debouzy, told Bloomberg Tax this month.

©2018 Bloomberg L.P.