A Conversation with Guy Wyser-Pratte

The Simon School of Business
Shareholder Activism:
A Conversation with Guy Wyser-Pratte
April 30, 2010
France
Lagardere
g
SCA
Lagardere S.C.A. (M M B-FR)
15-Feb-2010 to 01-Apr-2010
p
((Daily)
y)
Price
High:31.04
g
Low: 26.18 Last: 31.02
Wys er-Pratte
went public
dem anding a
s eat on the
Supervis ory
Board at the
upcom ing
AGM.
Additionally,
Wys er-Pratte
announced
he would
table a
resolution
challenging
Lagardere's
corporate
s tructure, one
which is
s everely
detrim ental to
s hareholders .
Lagardere
announced
FY2009
num bers
after the
m arket close.
The res ults
and outlook
disappointed,
and shares
s old off
s harply
following the
announcem ent.
31
30
29
28
Wys er-Pratte
purchases
s hares of
Lagardere.
27
26
2/15
2/22
3/1
3/8
3/15
3/22
3/29
©FactSet Research Systems
Wyser-Pratte Management Co., Inc.
Presentation to Shareholders
of
Lagardère SCA
Related to the April 27th, 2010
AGM/EGM
Wyser-Pratte
y
Management
g
Co.,, Inc.
_________________________________________________________________________________________________________
Introduction
Guy Wyser-Pratte is an “active value investor”, investing in situations where strategic
missteps local contrivances
missteps,
contrivances, and corporate governance malfunctions have
have, amongst others
others,
significantly depressed a company’s market price relative to the company’s unobstructed
potential. Mr. Wyser-Pratte is the catalyst for closing this “value gap” and, in this process, acts as
a catalyst for all manner of investing disciplines.
principal
p investment objective
j
of Mr. Wyser-Pratte
y
is to enhance shareholder value at
The p
undervalued and underperforming companies by the design and application of improved strategy,
execution and corporate governance procedures. Mr. Wyser-Pratte’s investment style is
characterized as “active value investing.” As a value investor, Mr. Wyser-Pratte invests in
situations where management, strategic direction or corporate governance malfunctions have
significantly depressed a company
company’s
s market price relative to the company’s
company s unobstructed
potential. This malfunction creates a “value gap” that presents the investment opportunity.
Mr. Wyser-Pratte will engage management in order to rectify the underperformance that
has led to the formation of the value gap. Mr. Wyser-Pratte believes that an effective engagement
of a comprehensively
p
y researched company
p y affords investors the opportunity
pp
y to benefit from a
recovering share price, as a redirected management more fully utilizes the assets under its
control. Mr. Wyser-Pratte has 40 years experience in corporate activism which has proven
successful in 10 jurisdictions primarily in Europe.
8
Wyser-Pratte Management Co., Inc.
_________________________________________________________________________________________________________
Overview of Lagardère SCA
•
•
•
•
•
•
•
Lagardère, a far-flung media conglomerate, led by Arnaud Lagardère, operates in more than 40
countries and is structured according to four distinct, business lines:
– Lagardère
g
Publishing,
g its book-publishing
p
g business segment
g
– Lagardère Active, which specializes in magazine publishing, audiovisual (radio, television,
audiovisual production and digital activities, and advertising sales)
– Lagardère Services, its retail and press-distribution business segment
– Lagardère Sports, which specializes in the sports economy and sporting rights
Lagardère Publishing is the largest book publisher in France and the second-largest
second largest publisher
worldwide
Lagardère is also present in aeronautics through a 7.5% stake in EADS, over which it exercises joint
control with the company's other shareholders
Lagardère owns a 20% stake in CANAL-PLUS, a pay tv channel, in which it has announced it will
g
a sale with the 80% owner,, Vivendi SA
negotiate
Market cap: $3.78 billion[1]
Number of employees (as of 2008): 29,889 [2]
Share ownership structure as of 12/31/2009 [2]
»
Non-French institutional investors: 58.51%
»
French institutional investors: 20.00%
20 00%
»
Lagardère Capital and Management: 9.62% (Can not vote on Supervisory Board Election)
»
Treasury stock: 3.22% (Do not vote)
»
Employees and group savings plan investment funds: 1.38%
»
General public: 7.28%
[1] http://www.google.com/finance
[2] http://www.lagardere.com/
9
Wyser-Pratte Management Co., Inc.
_________________________________________________________________________________________________________
Overview of Lagardère SCA (Cont.)
•
The general partners of Lagardère are Arnaud Lagardère and Arco, a public limited company.
Lagardère SCA has two categories of shareholders:
–
General partners - have “unlimited liability” for the Company’s debts and whose voting rights
are not freely transferable
–
Limited partners - liability is limited to their initial investment and who are represented by the
supervisory board. A. Lagardère has more than 100,000 limited partners
•
•
Board structure: Classified. The following six directors are up for election at the 2010 AGM:
–
Chairman: Raymond
y
H. Lévyy
–
Bernard Arnault
–
Amélie Oudéa Castéra
–
François Roussely
–
Patrick Valroff
–
Jean-Claude Magendie / Guy Wyser-Pratte
Dividend: The Managing Partners will ask the General Meeting of Shareholders to approve a
dividend of €1.30 per share, the same as the dividend paid out of 2008 profits
10
Wyser-Pratte Management Co., Inc.
_________________________________________________________________________________________________________
Organization
ARNAUD LAGARDÈRE
General Partner
99% CAPITAL
Statutory
dividend
LAGARDÈRE CAPITAL &
MANAGEMENT
99% CAPITAL
SA ARJIL COMMANDITE – ARCO
General Partner
Statutory
dividend
LAGARDÈRE SCA (listed company)
10% CAPITAL
AGREEMENT
100% CAPITAL
PAYMENT
LAGARDÈRE RESOURCES S.A.S.
11
Wyser-Pratte Management Co., Inc.
_________________________________________________________________________________________________________
Wyser-Pratte Resolutions at 2010 AGM/EGM
•
AGM/EGM to be held on April 27th, 2010
- 10:00 a.m. at the offices of Lagardère SCA – 4 Rue de Presbourg, Paris, 16e, France
•
Guy Wyser-Pratte seeking one Supervisory Board seat in place of Jean-Claude Magendie
•
Modification of the French Limited Partnership with Shares structure at Lagardère
12
Wyser-Pratte Management Co., Inc.
_________________________________________________________________________________________________________
Why Elect Guy Wyser-Pratte to the Supervisory Board?
•
•
•
•
•
•
•
•
•
•
•
•
Currently no shareholder representation on Supervisory Board
Already a significant shareholder of Lagardère – 695,647 shares
C rrent ssupervisory
Current
per isor board members ha
have
e little or no shareholdings – thus
th s interests not aligned with
ith
shareholders
Guy Wyser-Pratte’s election would give a voice to all shareholders
Guy Wyser-Pratte, over his 44-year career, has been a strong and assertive advocate of
shareholder rights
W ld push
Would
h ffor a ttransformation
f
ti off the
th currentt SCA structure
t t
Would work towards refining and refocusing the Company’s strategies
His previous supervisory board experience
–
Ingenico S.A. (President Strategic Planning Committee),
–
Prosodie S.A. ,
–
Maurel & Prom S.A. and
–
Vivarte S.A. (Strategic Planning Committee)
Additionally, Guy Wyser-Pratte has served on the boards of
–
Bache & Co., Prudential Bache Securities, and COMSAT Corp. (Strategic Planning
Committee)
Mr. Wyser-Pratte currently serves on the board of Kuka AG (Strategic Planning Committee)
As a global company Lagardère would be greatly served by Guy Wyser-Pratte’s international and
cross-border experiences
Guy Wyser-Pratte’s experience over four decades in the world of finance and his revered standing
within that community would complement the skill
skill-sets
sets and contributions of the Company’s
Company s other
Supervisory Board members
13
Wyser-Pratte Management Co., Inc.
_________________________________________________________________________________________________________
Guy Wyser-Pratte’s board-level participation has lead to
unlocking shareholder value
•
•
•
•
•
At Comsat Corporation,
Corporation Mr
Mr. Wyser
Wyser-Pratte's
Pratte's presence on the Strategic Planning Committee (the
only substantial holder of shares on the board of directors) elicited a bid from the Lockheed Martin
Corporation. He then was instrumental in successfully lobbying various congressional committees
to modify the 1962 Communications Satellite Act. This led to the successful merger with
Lockheed Martin.
At Prosodie S.A. Mr. Wyser-Pratte foiled an insider attempt to sell the company to the founders at
a deep discount. By organizing the shareholders in opposition to the sale a higher bid was
obtained for the company by a third-party resulting in a significantly higher LBO bid from the
insider group.
At Vivarte S.A. Mr. Wyser-Pratte again foiled insider attempts to force a discounted leveraged
buyout bid. He helped restructure the company such that it was successfully sold to PAI Partners
S.A.
At Ingenico S.A. Mr. Wyser-Pratte helped restructure the company by implementing cost and
quality controls and worked with the new CEO to increase shareholder value
value.
At Kuka AG, Mr. Wyser-Pratte a 9% shareholder since 2003, worked to replace the Board of
Directors and the management in 2005 and the Board of Directors again in 2009. Between 2005
and 2008, Mr. Wyser-Pratte forced the company to sell its Processing and Packaging Divisions, in
the absence of which the company
p y would now be insolvent. Along
g with 30% holder Grenzebach,
Mr. Wyser-Pratte is presently working to further restructure the company, among other initiatives,
focusing on new areas of advanced technical robotics.
14
Wyser-Pratte Management Co., Inc.
_________________________________________________________________________________________________________
Guy Wyser-Pratte Biography
•
Born in Vichy, France, on June 21, 1940, Guy Wyser-Pratte immigrated to the United States with his
parents and two brothers in March 1947,
1947 becoming a naturalized citizen in 1953
1953. He received a BA
in History from the University of Rochester in June 1962 and an MBA in Finance from New York
University in June 1971. From June 1962 through June 1966 he served on active duty as a
commissioned officer in the U.S. Marine Corps, attaining the rank of Captain.
•
His firm, Wyser-Pratte & Co., had its origins in Paris, France, which his father, Eugene, opened in
1929, specializing in international arbitrage. The firm was re-opened on Wall Street in 1948, and
was eventually merged into what was then Bache & Company in July 1967 where Guy Wyser-Pratte
and his father presided over Bache & Company’s
Company s risk arbitrage activities.
activities In January 1971
1971, Guy
Wyser-Pratte was selected to head the Arbitrage Department at Bache & Company where he
presided until January 1991. In February of that year, he resurrected the family firm Wyser-Pratte &
Co.
•
He has authored two monographs for the New York University Salomon Brothers Center: Risk
Arbitrage and Risk Arbitrage II, which are considered to be the standard textbooks in the industry.
•
In 2009 publisher John Wiley & Sons, Inc. published Risk Arbitrage as a text.
15
Wyser-Pratte Management Co., Inc.
_________________________________________________________________________________________________________
Guy Wyser-Pratte Biography (Cont.)
•
Mr. Wyser-Pratte became a driving force in the shareholder activist movement in the 1970’s. He
has maintained
maintained, throughout his 40 year career,
career a singular dedication to the basic tenets of
shareholder rights and the need for managers to play a more active role in their investments. In the
past 15 years, Mr. Wyser-Pratte has completed over 70 activist projects in 10 jurisdictions globally.
Notable examples in France include Taittinger S.A., Vivarte S.A., Strafor Facom S.A., and most
recently Valeo, S.A. In Germany, recent examples include Vossloh AG, Kuka AG, Balda AG and
CeWe Color Holding AG.
•
Mr. Wyser-Pratte is a former board member of Ingenico S.A., Prosodie S.A., Maurel et Prom S.A.,
Comsat Corporation,
Corporation Prudential Bache Securities
Securities, Bache & Co
Co., and Vivarte S
S.A.
A
•
Mr. Wyser-Pratte is Vice-Chairman of the U.S. Marine Corps University Foundation, and former
Trustee of the Congressional Medal of Honor Foundation. He serves on the board of the
International Rescue Committee and is a member of the Council on Foreign Relations.
16
Wyser-Pratte Management Co., Inc.
_________________________________________________________________________________________________________
Why Modify The SCA Structure?
•
A change in the SCA structure is consistent with best corporate governance practices
•
General Partner is not accountable to shareholders – But is able to control the Company, though
controlling less than 10% of the shares outstanding
•
Any and all board action is subject to the prior veto of the General Partner
•
Sh h ld
Shareholders
voices
i
should
h ld b
be recognized
i d iin th
the managementt off their
th i Company
C
•
Financial benefits of General Partner not inline with best practices – reward not proportionate to
ownership or strategic contribution
•
The Board of Directors is not responsive to shareholders
•
Discount to value arising from SCA structure and conglomerate exceed the individual value of each.
In effect, we believe, the discounts become synergistic
•
Total Strategic Review at Lagardère SCA is warranted – modifying SCA structure is important to
enhance shareholder value
•
Mr. Wyser-Pratte believe there is significant upside potential in a restructured company where all
shareholders are treated equally and can hold directors and management accountable
17
Wyser-Pratte Management Co., Inc.
_________________________________________________________________________________________________________
Conclusion
•
The election of Guy Wyser-Pratte to the supervisory board of Lagardère would not only be
consistent with best corporate governance practices, but his strong finance background and current
and previous board service would enhance the existing Supervisory Board
•
Mr. Wyser-Pratte would act on behalf of all shareholders interests pushing for a “normal” corporate
governance structure and advocating a review of all strategic alternatives
•
Lagardère’s SCA structure creates both a conglomerate and structural discount which when
combined severely undercapitalizes the real value of the Company’s assets. This can also be
attributed to the total lack of accountability of either the general partners (Commandités) or board
members (Conseil de Surveillance) to the shareholder limited partners (commanditaires)
•
A thorough strategic review is warranted and long overdue
18