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23-11-2024 : Robertet or the value of a voting right

There are times when we need to consider the value of a non-voting share, and the subject is not a simple one.

 

Last week's exit of Firmenich from the capital of Robertet, world leader in natural raw materials for perfumes and aromas, is illuminating. Robertet is the only one of the 818 companies currently listed in Paris to have both listed voting and non-voting shares.

 

In 1987, because the family's control over Robertet was fragile, the company had stripped ordinary shares into investment certificates (IC) and voting rights certificates (VRC): an IC is a share deprived of its voting rights. 

 

CIs were created in 1983 by the French government to finance nationalized companies. BNP, Saint-Gobain and others issued CIs to the public, without diluting the State's stake in their capital, as the State kept the associated VRCs. Private firms such as Bouygues and L'Oréal followed suit. But the innovation, at least for listed companies, didn't catch on, and soon all these CIs disappeared through redemption or conversion into ordinary shares with voting rights. 

 

All, that is, except those of Robertet, which now has 3 stock market quotation lines: ordinary shares, CIs and VRCs. The latter are very rarely traded, as they are mainly held by the family. The CIs are much more widely traded, but their liquidity is reduced by the fact that FirmeniSo the value of a voting right depends very much on the configuration of the shareholder base. Other factors come into play, such as the ability of a third-party purchaser of control to improve margins, or possible competition between several third-party purchasers. 

 

It's easy to see why it's hard to see a discount on Hermès shares, where the limited partnership structure leads to solid family control and it's hard to see how the current management can do better. Or why, in agricultural cooperatives, the principle of one vote per cooperative member, irrespective of the shares held, means that voting rights lose all value. As a result, all shares in a cooperative have the same value, whether or not they carry voting rights, since a voting right is worthless. In this case, the absence of voting rights does not justify any discount.

09-11-2024 : The future governance of Havas

Vivendi's governance was already characterized by the oddity that the Chairman of the Supervisory Board, Yannick Bolloré, was also the Chief Operating Officer of one of Vivendi's main subsidiaries, Havas. Certainly nothing illegal, but the spirit of balanced governance between management and control powers was undermined, as the chairman of the supervisory board could hardly supervise and control himself. And who could imagine the Chairman of Vivendi's Management Board, irrespective of his qualities, taking a swipe at Havas' Chief Operating Officer for, say, under-performance or faulty implementation of the defined strategy, when he is also his supervisor in his capacity as Chairman of Vivendi's Supervisory Board??..? Especially when you consider that he is part of the family group that de facto controls Vivendi with just under 30% of the capital.

In Havas, whose parent company has become Dutch and will be listed on the Amsterdam stock exchange to enable the Bolloré group to benefit from quadruple voting rights (see my post of October 12), the oddity takes on a new, well-intended dimension, since we were starting from scratch. The governance of post-split Vivendi remains the same: Yannick Bolloré supervises and controls Arnaud de Puyfontaine, Chairman of Vivendi's Management Board. With Havas, the situation is reversed, and Arnaud de Puyfontaine becomes Chairman of the Havas Supervisory Board, in charge of supervising and controlling his shareholder Yannick Bolloré, who becomes Chairman of the Management Board ... . Children would call this holding on to each other's goatees.

Anyone who believes that governance has an impact on corporate performance and value will not be surprised to note the following: since Bolloré took control of Havas in 2012, without a takeover bid to disinterest minority shareholders thanks to a clever use of the French watchdog market authority's general regulations, the value of Havas has multiplied by just under 2 in 12 years, from €1,700m to around €3,000m. For its competitor Publicis, and over the same period, it's by a factor of 3.2 (from 7,600 M€ to 25,000 M€). Publicis has thus become the world leader in its sector by market capitalization. It's true that the founding family of Publicis never thought that genius was hereditary, nor did they cling to a percentage shareholding, accepting instead to be diluted by successful external growth operations, led by brilliant managers they had detected and promoted, Maurice Lévy and Arthur Sadoun.