France raises Renault stake to ensure long-term control

The French government has been buying shares in French carmaker Renault SA to increase its stake to up to 19.73 per cent with the aim of blocking a resolution at the next annual general meeting that could reduce its control over the company.

France agreed to buy up to 14 millionRenault shares or 4.73 per cent of the group via a broker, which has already bought 9.56 million shares and will buy the remaining ones at a capped price, the finance ministry said in a statement on Wednesday.

The value of the shares range between €814 million and €1.232 billion , it said, adding that a put option had been agreed for six months.

“This deal shows the State’s intention to use all the arms at the disposal of investors today to promote a progressive, long-term kind of capitalism that supports workers and helps companies grow,” Economy Minister Emmanuel Macron said in the statement.

France passed the “Florange” law last year, named after a closed steel factory, that gives double-voting rights to investors who register shares in their name and hold them for at least two years. But shareholders can adopt resolutions during annual general meetings to maintain the one-share, one-vote system. One such resolution has been proposed for Renault’s annual meeting on April 30 and the government is seeking to ensure it does not pass, the ministry said.

The government’s goal is not to raise its stake over the long term, but to make sure the resolution does not pass by securing about 23.2 per cent of voting rights at the meeting, a source close to Macron said. Double-voting rights are already common in France, unlike in the United States and Britain where the one-share, one-vote principle is considered a cornerstone of good corporate governance.

Twenty-two companies in France's blue-chip CAC-40 index of 40 companies already have some form of double-voting rights and more will join once the Florange law takes effect. Similar moves to give the state double-voting rights are underway at EDF and GDF Suez as a way to maintain its sway even if it eventually decides to sell down its stake. Selling down such holdings is a way for France to reduce debt at a time of sluggish growth and pressure from Brussels to balance the budget.

France has committed to selling €4 billion worth of shares this year and Macron pledged in October to sell between €5 billion and €10 billion worth of state holdings in the next 18 months.

Shares in Renault closed up 0.71 per cent at 85.26 euros on Tuesday.

Reuters