After two weeks of conflict, Renault and the French government still digging their heels. Between statebuilding and allocation of voting rights to Nissan, the outcome of the showdown is uncertain.
Where is the exit? After two weeks of conflict, Renault and the French government still digging their heels. The government remains committed to acquire double voting rights, under the law Florange, wishing “to maintain the balance of the covenant.” For its part, the Renault board chaired by Carlos Ghosn reiterated Thursday his support for the twelve resolution which will be voted on at the April 30 meeting, and plans to depart from the Florange law.
What’s going to happen to the general meeting?
The state is on track to obtain the rights to double voting. With the acquisition of a portion of 4.73% of Renault’s capital, which will raise its stake to 19.7% for 23% of the voting rights, Bercy think having secured the necessary blocking minority in rejection of the resolution. For this, the text must be rejected by the third quorum. Haunted by this maneuver, some shareholders do not despair to reverse the trend. “ The state gives a deplorable example. Under the pretense of long-term shareholder protection, it uses a temporary process, worthy of a hedge-fund, it’s totally contradictory. We can not shake and the governance of a group e “Judge Colette Neuville, president of Adam, the defense association of minority shareholders.
How the state is it mounted to capital?
The state has spent more than $ 1 billion euros to secure the double voting rights at the next AG. Friday 17 in the morning, Deutsche Bank had sold him between 12 and 13 million shares. The transaction was accompanied by a “collar”, a “tunnel” in French, to protect against a decline in stock prices. This is to make two trades at the same time, by making the purchase of an option to sell (right to sell) and the sale of a call option (right to buy) from the bank. “ Between October and December 2015, Renault shares can be sold to Deutsche Bank at 90% of the share purchase price if the price fell below that level, or 110% of that reference if the During rose “indicates Jerome Laurre, managing partner of Bank Degroof. The state could simply borrow the securities without buying them; which would have allowed him to enjoy voting rights. This solution was not selected for image reasons. Use the methods of hedge fund is not the best effect. But not only the state could fear that the lender can not remember his titles before the GM and he finds himself without the attached voting rights.
What will be the final position of the state?
The state has already indicated that it would sell securities purchased after the meeting. What then will Bercy double voting rights obtained, which will be activated from 2016? The State is not obliged to state its intentions now. It can avoid conflict with Renault lowering in 2016 its participation level of around 10% while maintaining its influence through its double voting rights. But nothing indicates that Bercy is ready to give up such a strong power. “ In 2002, the French state had 25.9% of Renault’s capital, even as Nissan did not have voting rights, and this posed problems. Today, Renault made to believe that the balance is broken. All this is a pretext “Judge a source. At Renault, we are reminded that the current situation has nothing to do given the weight of Nissan in the alliance. Since 1999, the Japanese ally allowed the French group to reap 15 billion euros of profit, more than 4 billion euros in dividends, besides improving the share price. No wonder, under these conditions, the strengthening of the French state is frowned upon by the Japanese ally. Especially as other shareholders, such as Daimler, which owns 3.1% of Renault’s capital, could also be strengthened, acquiring double voting rights.
What can Carlos Ghosn?
If the state is strengthened, the CEO of Renault-Nissan may decide to give power back to Nissan to acquire voting rights, and thus maintain the balance of the alliance. For this, Renault could reduce the participation of Renault (43.4%) in Nissan to avoid self-position. Article L233-3 of the Commercial Code states that a company is “presumed” control another “ when it directly or indirectly holds voting rights in excess of 40% ” . The question is how this new status would be welcomed Nissan by the French state.
What medium-term consequences?
This standoff puts on the table the capital structure of the alliance. “ The lesson we can already draw is that it must change the current cross-shareholdings. Otherwise, other problems will arrive “pleads a foreign shareholder of Renault. Besides the delicate household between the state, Renault and Nissan, some point the increasing integration of Renault and Nissan (common platforms, pooled directions …) which makes it less readable the distinct interests of the shareholders of Renault and Nissan. For many, this case could encourage outright merger of two medium-term groups. “ Qu’apporterait a capital marriage while the operational merger is sufficient to bear fruit? ” wonders, however, one analyst.
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