Bouygues anti-takeover proposals

Bouygues, a constituent of the French blue-chip index, the CAC 40, is looking for shareholder approval for three potentially contentious proposals at the forthcoming AGM on 23 April.

The most contentious proposal is Resolution 24, seeking an authorisation to issue ‘bons breton’ warrants. Legislation passed in France in 2006 allows directors, with shareholder approval, to adopt a form of poison pill to discourage takeovers. The legislation allows companies to issue warrants (referred to as ‘bons Breton’ after Thierry Breton, the Finance Minister who proposed the mechanism) to existing shareholders at preferential prices to block hostile takeovers.

The text of the share buyback resolution allows the authorisation to be utilised at any time, and thus may be utilised during a takeover period. As such, Manifest views this as an anti-takeover measure.

Another resolution seeks to utilise nine of the various capital authorities sought during a takeover period and are thus also considered by Manifest to be an anti-takeover measure. These authorities include the issue of shares while dis-applying pre-emption rights which is of an amount in excess of 40% of the existing issued share capital.

Manifest’s 2008 Voting Review noted that the only two CAC 40 companies (Vallourec and Cap Gemini) to have sought approval of ‘bons bretons’ in 2008 both withdrew the proposals ahead of the AGM in view of investor opposition. However  Bouygues is dominated by the Bouygues family which utilises double voting rights and three Board positions (including the combined role of Chairman and CEO) to exert control of the company. Only six of the 18 directors (plus two non-voting directors) are independent.

It is questionable, at best, as to whether any of the three proposals may be considered to be in the best interests of shareholders.  However, the combined voting power of the Bouygues family and the employee shareholders may prove sufficient to ensure that these proposals are approved at the meeting.

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