Monthly M&A Insider - Mergermarket

France
M&A in Q1
• The M&A activity in France for the first quarter of 2009
is, as expected, slowing down. The total deal value was
only about €2bn, which represents a fall of approximately
69% compared to the total deal value of the last quarter
of 2008 (€6.6bn). The downfall in the total deal volume is
not as dramatic at 72 deals. The figure represents a cut of
11% from the last quarter of 2008 where 81 deals were
completed. This dramatic drop in total deal value is not too
surprising. Indeed, excluding a few megadeals, the M&A
world has very been quiet.
• However, there is one market in the French M&A activity
that seems less affected by the economic turmoil. The midmarket
trend in France for Q1 2009 is almost at the same
level than for the 3 past quarters. 26 deals were reported
on this market on Q1 2009. These are 9 more deals than
in Q4 2008 (+52%), 11 deals less than in Q3 2008 (-30%),
and 5 deals less than in Q2 2008 (-16%). €1.4bn had been
exchanged on this market in Q1 2009, which is about
73% of the total deal value on the French market. Yet, the
average deal size on this market tends to be smaller. It is
€57m for Q1 2009, but was €98m on Q4 2008, €65m on
Q3 2008 and €60m on Q2 2008.
• In the league table ranking, the financials advisers are
dominated in value and volume by Lazard on the first
quarter 2009. Linklaters are on top of the legal advisers
table in volume and are second in the value ranking, while
Cleary Gottlieb Steen & Hamilton hold the first rank in the
total value ranking.
Will Nestlé invest or divest L’Oreal?
• A joint statement, published on 9 April on the Paris stock
exchange, stated: “The Bettencourt family and the Nestlé
company will continue on acting in concert towards the
L’Oréal company beyond 29 April 2009”. It is understood
that Nestlé, the Swiss food group, would be able to sell its
31% stake in L’Oréal when its lock-up agreement with the
Bettencourt family, main shareholders of the France based
cosmetics group, will expire.
• Under the terms of the 5-year agreement between the
shareholders, Nestlé cannot raise its holding during the
lifetime of Liliane Bettencourt, the 86-year old billionaire
daughter of the L’Oreal founder, and also the French richest
woman, who holds a 31.78% stake in the cosmetics
company. This agreement is due to expire on 29 April 2009.
• However, if the arrangement deflecting Nestlé and the
Bettencourt family from selling their L’Oréal holding will
soon expire, the rest of the agreement remains intact. It
includes a mutual right of first refusal on their holdings. It
also allows for the two sides either to tender their shares,
or make a counter offer, if L’Oréal receives an offer from a
third party.
• Nestlé released that they are not under any pressure to do
anything at the time being and will continue to take a long
term view. If the statement suggests the status quo will
continue for the time being (Nestlé does not need cash and
has very little to gain from acquiring L’Oréal), speculation
about Nestlé’s new intention regarding its L’Oréal stake has
changed.
• While Nestlé was initially understood to be a likely buyer
for L’Oréal, it is now believe than Nestlé is more likely
to sell its stake than to raise it, as its strategy is now to
focus on operational excellence and to avoid big takeovers.
Moreover, L’Oréal, like many other groups, has become
much less attractive in the downturn.
Monthly M&A Report – 121