(MENAFN- AFP) The French government said Wednesday it is increasing its holding in carmaker Renault to gain a blocking minority stake and ensure that measures designed to reward long-term investors come into force.
A law adopted last year to encourage long-term investors will give them double voting rights at shareholder meetings, although shareholders can vote to opt out of the system.
With some Renault shareholders looking to prevent these measures from taking effect at the annual meeting on April 30, the finance and economy ministry said Wednesday it was buying shares to take the state's stake to 23.2 percent, up from its previous holding of 15 percent.
Given Renault's diverse shareholder base and generally low participation rate at shareholder meetings, a ministry source said this should give it the third of votes needed to block an effort to keep the double voting rights measure from taking effect.
Officials said the move was in line with the French government being an activist investor and protecting the nation's long-term interests.
"This operation demonstrates the desire and capacity of the French state to utilise all the tools at the disposal of investors to promote capitalism and progress in the long term in the interests of employees and the development of companies," said Economy Minister Emmanuel Macron in a statement.
"This operation shows that the French state is at the same time a shrewd investor and a defender of the public interest."
The French state has not shied away from protecting companies it views as strategic, recently seeing off attempts by Yahoo! and a Hong Kong telecoms giant to buy a stake in the video-sharing site Dailymotion.
It was also deeply involved last year in the split-up of rail and energy equipment manufacturer Alstom, eventually choosing a 12.4 billion euro ($13.5 billion) offer from GE over Siemens after obtaining better terms concerning the nuclear, steam turbine, offshore wind and hydro power businesses.
The finance and economy ministry said it had already acquired 9.56 million Renault shares and would buy another 4.44 million at a cost of up to 1.2 billion euros.
- Practice already widespread -
The Florange law adopted last year extends the practice of rewarding investors who hold their shares for longer than two years by giving them double voting rights, a practice that the ministry said is already in effect at more than half of the companies listed on the Paris stock exchange's blue-chip CAC 40 index.
"It is an effective way of inciting investors to hold on to their shares and thus better contribute to the development of companies by reinforcing the influence of long-term shareholders, including employee shareholders," the ministry said.
Under the law, company shareholders will have to expressly opt out of the double-vote measures.
Renault declined to comment on the government's move.
Nationalised after WWII, the carmaker was transformed into a shareholding company at the beginning of the 1990s and the state's stake fell under 50 percent in 1996.
Charles Pinel, an associate at Proxinvest, a firm that advises investors on shareholder voting, said he was disappointed by the state's move.
"Their argument is that it ensures the stability of shareholders over the long term, but they don't take into account that a lot of long-term shareholders won't be able to benefit from the double votes" as they hold the shares on a bearer and not a registered basis.
He warned that this could also turn foreign investors off French shares.
Renault shares rose 0.14 percent to 85.38 in early afternoon trading while the CAC 40 was down 0.09 percent.
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