(Bloomberg Opinion) -- Billionaires Bernard Arnault and Vincent Bollore made a spectacular entrance into the activist fight over Lagardere SA last year. Fast forward to today, and Bollore-controlled Vivendi SE is on the verge of taking over the storied media group behind Paris Match, while the London-based activist who started the saga looks poised for a tidy exit.
The puzzle is why the formidable Arnault — number three in Bloomberg’s Billionaire Index — appears to have achieved almost nothing.
Tiny Lagardere punches above its weight for a 3.2 billion-euro ($3.8 billion) company. True, it’s no longer the conglomerate overseen by the late industrialist Jean-Luc Lagardere. But it possesses some crown-jewel media assets, including broadcaster Europe 1 and Sunday newspaper Le Journal Du Dimanche. Former French President Nicolas Sarkozy is on the board.
In 2016, Amber Capital U.K. LLP started buying the shares. Lagardere was a serial poor performer and the stock looked cheap. Years of rancor between the two sides followed, culminating in Amber launching a campaign to change the board early last year. The hedge fund argued that Lagardere’s antiquated “commandite” structure shielded scion and Managing Partner Arnaud Lagardere from accountability, keeping him well-remunerated even as shareholders suffered.
While this unusual governance couldn’t be dissolved without Arnaud Lagardere’s agreement, Amber reckoned the firm’s supervisory board had carrots and sticks to persuade him to end it. So it asked shareholders to appoint a board that would initiate such talks.
Enter Bollore. At the time, Vivendi was hatching a plan to carve out its Universal Music Group record label. Amber’s assault on Lagardere created the chance that the beleaguered firm’s assets, or the whole company, could come up for sale — potentially attractive to Vivendi as its focus shifted to European media. So Vivendi bought a seat at the table by taking an 11% stake in late April.
It was tempting to see this as Bollore coming to Arnaud Lagardere’s aid. Vivendi subsequently helped swing the shareholder vote against Amber’s board slate. The reality is that Bollore wasn’t interested in preserving the status quo.
Arnaud Lagardere certainly wasn’t betting that Vivendi would continue to keep Amber at bay. Weeks later, he teamed up with Arnault, selling the founder of luxury giant LVMH a stake in his personal holding company — the vehicle through which he exercised control over Lagardere via the commandite. Arnault cited his friendship with Jean-Luc when the deal was announced.
It seemed like a masterstroke of deal-making. Arnaud Lagardere got a financial boost. This alleviated any financial pressure to scrap the commandite for compensation. And Arnault was now in the Lagardere cockpit as a co-pilot. That surely gave him an advantage over Bollore if there was to be any scramble for the group’s media assets.
The Arnault-Arnaud axis was a shock. The curious thing is that the pair didn’t build on it. The obvious move would have been for Arnault to immediately buy shares in Lagardere itself, like Bollore and Amber. It’s not as if he couldn’t afford it. He’s worth $158 billion, against Bollore’s $8 billion, according to Bloomberg data. Either this was a straight tactical error, or Arnault wasn’t keen on fighting Bollore too hard. It would be months before he bought a stake in Lagardere itself, by which time Vivendi had itself acquired more.
Whatever the reason, Arnault’s decision not to invest directly in Lagardere sooner and with more conviction left the door open for Bollore to partner with Amber in August 2020, leaning on the supervisory board to pressure Arnaud Lagardere into surrendering control. The board had a stick — it was duty-bound to review what the company paid to Arnaud Lagardere. By April, a deal to end the commandite was sealed.
Vivendi on Wednesday agreed to buy Amber’s holdings, which would push Bollore’s firm over the 30% threshold where it has to make a full bid. Having expanded its stake when Lagardere’s share price was under pressure last year, Amber looks set to be able to exit having achieved both the aims of its campaign and a return for its investors.
As for Arnault, his intervention has not preserved Lagardere in its existing form, nor secured him any assets, nor made a lot of money. After his disappointing investment in supermarket Carrefour SA, this episode does raise questions about whether his Midas touch extends outside the luxury sector. That said, he could surely have given Bollore a much tougher run for his money if he’d really wanted to. He seems to have let Bollore run away with it.
Of course, Vivendi may need to make disposals to close a deal. Arnault’s current 7% stake could create some leverage to pick up some assets as a consolation prize. The saga isn’t quite over yet. But Bollore, not Arnault, holds the strongest cards right now.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.
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