French presidents were once so drawn to reshaping the country’s leading companies into bigger and supposedly more competitive entities their tinkering was known as Meccano industriel. Governments became accomplished players, using state holdings and the influence of close-knit corporate and bureaucratic elites to assemble their constructions. But in recent years the political game, much like its real-life equivalent, has fallen out of fashion. Rather than playing the game, it seems that French political leaders are now being played.
One French takeover saga, LVMH’s abortive $16.6bn purchase of Tiffany, shows how the tables have turned. The luxury group owned by French billionaire Bernard Arnault agreed in November to pay $135 a share for the US jeweller in what would have been the largest ever deal in the luxury sector. But since the pandemic cut a swath through global jewellery sales Mr Arnault has been trying to renegotiate terms.
Tiffany alleges that LVMH has dragged its feet on filing for antitrust clearance, in order to delay the transaction and run down the clock on the merger agreement. The French group said it always intended to file in time for merger approval before the original November 23 deadline for completing the deal. It submitted its dossier to Brussels on September 21.
Then, on September 9, LVMH revealed it was pulling out of the deal following a highly convenient request from the French government. The request was made in a letter from Jean-Yves Le Drian, the foreign minister, on August 31 asking LVMH to delay completion of the deal until January 6 “to support the steps taken vis-à-vis the American government”. Mr Le Drian was referring to a US threat to impose punitive tariffs on certain French goods, including luxury items, by January 6 in retaliation against Paris’s decision to introduce a digital services tax.
“I am sure that you will understand the need to take part in our country’s efforts to defend its national interests,” Mr Le Drian said in the letter addressed to Mr Arnault.
Jean Jacques Guiony, LVMH’s chief financial officer, said the company was “prohibited” from closing the deal following Mr Le Drian’s intervention. He has denied that the letter was written at LVMH’s request.
But the foreign minister’s letter poses more questions than it answers. For one thing, the original French wording has not been published. LVMH has only supplied Tiffany’s lawyers with a non-certified translation. It says LVMH “should defer the closing” of the deal, which sounds more like an exhortation than a ban. In any case, it gives no legal basis for deferring the transaction, which is surprising given the inevitable threat of litigation, which Tiffany immediately triggered.
In repeated trade spats between the EU and the Trump administration, France has deferred to the European Commission to respond rather than take unilateral action itself, which makes Mr Le Drian’s letter all the more remarkable. So does the fact that it is France’s finance ministry, not the foreign ministry, that has led negotiations with Washington over its digital tax plans and proposals for a wider shake-up of international corporate taxation.
Bloomberg reported that LVMH first approached finance minister Bruno Le Maire, but was rebuffed. LVMH said the claim was “totally unfounded”. Why the Trump administration would be especially displeased by a French company abandoning the purchase of a famous US brand is also a mystery.
The idea that LVMH had no hand whatsoever in this exceptional government intervention beggars belief. The company has maintained good relations with President Emmanuel Macron. His wife Brigitte is good friends with the Arnault family. Ismaël Emélien, Mr Macron’s former chief strategist and one of his closest aides, became a consultant for the luxury group after quitting the Elysée Palace last year. Mr Arnault, France’s richest man, holds huge sway over public life through his philanthropic activities and media assets, which include the business daily Les Echos and the more downmarket Le Parisien.
More importantly, LVMH, is now a strategic national asset. It is by far the biggest French company by market value. Its foreign sales are a vital contributor to the country’s external trade balance — and all the more important given the pandemic woes of Airbus, France’s other industrial champion, and the aviation sector as a whole. It is a rare segment of French business with international pricing power and its production cannot easily be transplanted elsewhere.
It is hard to argue that saving a few billion of dollars on an ill-timed acquisition or helping to sink it altogether is an important national interest for the French state. But what is good for LVMH is now deemed to be good for France.
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