Crédit Lyonnais

"François Pinault has indeed already been able to inspire confidence in Roger Puéchaldou, from Crédit Lyonnais in Rennes. And, already, he works with the money he borrows. His debt unsettles the augurs of good homes in the area who, reproducing their profits identically, do not think about modernising, neither by the benefits they garner, nor, especially, by attracting other capitals."

"The funds for the capital increase still need to be found. On one side, Alain Clarou, on the other, Antoine Bernheim, take up their pilgrim's staff. Arnault had assured Bernheim that he could put 90 million on the table, but he actually only has 40 million, from the sale of Férinel's construction activities. Crédit Lyonnais, in which Michel Lefebvre has kept excellent contacts, is ready to advance 50 million. In any case, 90 million is by far insufficient. Lazard Bank will fully engage to bring together a solid consortium."

"If he is suspicious and perfectly organized, Bernard Arnault is also quick. Faced with the Dalton brothers, he decides to play Lucky Luke, the cowboy who shoots faster than his shadow. He will buy the shares held by the Willot brothers. He doesn't have the necessary money? He asks Antoine Bernheim for help, but he backs out: he did not get the approval of Michel David-Weill to commit further. He himself is not very enthusiastic: why spend so much money to recover these useless shares? They are only of interest to Bernard Arnault, in a heritage context. Regardless of Lazard's reluctance! Arnault will turn to Crédit Lyonnais, always ready for adventure."

"To do so, he increases the capital by 530 million francs, which is fully subscribed by the new partners. Half a billion in fresh money thus enters his coffers. Arnault can therefore repay Crédit Lyonnais while remaining in control by keeping the majority of Arnault and Associates SA, which controls Financière Agache."

"Lévêque knows that he will soon be ousted by the returning Socialists. Eager to make a big splash before his departure, he has decided to sponsor the secret alliance between Arnault and Racamier by opening up a first credit line of 2 billion francs to his protégé. He will be able to mobilize more than 5 billion to take 20% of LVMH. In reality, Crédit Lyonnais is offering Bernard Arnault an almost unlimited right of withdrawal that day. Arnault therefore continues his purchases on the stock market, which has the consequence of alarming Chevalier, who still doesn't know where the attack is coming from. On May 31, 100,000 LVMH shares are traded, 98,000 on June 1, 169,000 on June 2, compared to 25,000 under normal circumstances. The group is dancing on a volcano."

"For Arnault, on the other hand, the crash is a new stroke of luck. The opportunity is unexpected. Especially since, for months, he has been amassing ammunition. In September, one month before the crash, he put 13% of Conforama's shares on the stock market, which earned him nearly 300 million francs. A little later, it was Arnault and Associates, the head company, that was introduced to the second market. And in November, Financière Agache obtained a long-term credit of more than 800 million francs from a banking consortium led by Crédit Lyonnais. What does Arnault do with this war chest? With the support of Lazard bank, he buys LVMH shares, both personally and through Financière Agache."

"However, the arrangement around Dior did not go as smoothly as expected. When he organized it, Arnault never doubted for a moment that the Dior shares issued would sell like hotcakes. Although they were expensive, he believed that the name Dior, along with the control of LVMH, would be magical enough to attract the wallets of French and international investors to whom they were offered. However, the plan seemed a bit far-fetched. Indeed, to everyone's surprise, investors hesitated. Crédit Lyonnais, the lead underwriter, encountered more difficulties than anticipated. Apart from the Japanese insurer Nippon Life, which invested 500 million francs, foreign financiers stayed away. The remaining shares were left in the hands of Crédit Lyonnais, which had to wait some time to recoup its funds. Eventually, Guinness, as part of the overall negotiation, took over the 16% stake in Dior's capital that the bank had no use for."

"He also allows Guinness to buy 16% of Christian Dior, but these were securities that Crédit Lyonnais had on its hands! In both cases, Arnault cleverly presents his progress as a concession. Tennant, thus, does not lose face even though he had to give in to the young Frenchman."

"Even though its coffers were empty, regardless of what was said at the time. Based on his good reputation, past successes, and the support of Lazard, these 21 billion francs were borrowed from Crédit Lyonnais, which opened massive and immediate lines of credit, practically on demand."

"For the CEO, cascading has a major advantage: it allows for absolute power with a small fraction of the capital. As the owner of company A, I control 51% of company B, which controls 51% of company C, which in turn... "With only three successive holdings, one can have power over the company at the bottom of the structure by committing capital equal to about 13% of the net asset," wrote Jean Peyrelevade in the magazine Banque in 1985. The current president of Crédit Lyonnais, who was then chairman of UAP, denounced the ill effects of "capitalism without capital," which gives power to executives who are not accountable to anyone. He is now a particularly discreet director of LVMH. For the king of cascades, there is still a catch: when dividends flow upstream, they are divided by two at each level in the opposite direction! As for minority partners, it is hard to see the advantages they gain from tying themselves up like this, unless they believe that the horse they hitch themselves to will outclass all others and allow them to grow rich alongside it."

"Arnault will therefore use the third solution, that of cascading. This involves stacking control companies on top of each other and opening their capital to minority shareholders who wish to be associated with the presumed success. These can be anonymous small investors or clearly identified external partners. He had already practiced this in 1986 when he had to pay cash for the last Willot shares. To find the 400 million francs, he sold a portion of the capital of Arnault et Associés, the former Férinel, his holding company, to Crédit Lyonnais and Duménil-Leblé. The following year, he raised funds by listing 13% of Conforama on the stock market. He brought Guinness in at 40%, then 45%, within Jacques Rober, the shell that now holds the LVMH shares. Of course, the sales are always partial. Bernard Arnault's golden rule is to always retain, under any circumstances, 51% of the capital of his companies to ensure he maintains control."

"Thanks to Crédit Lyonnais' devotion, which lent the money and was now burdened with Christian Dior shares, Arnault found 3.3 billion francs from others. However, he needed to contribute 2 billion of his own to complete the capital increase while retaining 58% of Dior. Where would he find these funds? Robert Léon suggested selling one of his distribution companies, either Conforama or Le Bon Marché. However, such a possibility did not fit into Arnault's strategy, as he disliked selling assets. Furthermore, these two companies were listed on the stock exchange, providing the opportunity to raise capital."

"In the spring of 1992, Crédit Lyonnais was practically printing money. They had advanced 500 million francs to Tapie to buy Adidas, 600 million to Bolloré, taken 20% of one of Arnault's leading holdings for 520 million, and, among other generous acts, came to the aid of Pinault by buying the former headquarters of CFAO for 1.3 billion."

"After which, unlike Bernard Tapie, François Pinault understands that if he wants to enter the big leagues, he will have to break with his past and buy himself a conduct. What took three generations in the 19th century is done in one life at the end of the 20th... He sidelines his former associates, moves away from the world of commercial courts, whitens himself by calling on Alain Mine for his advice, and Anne Méaux for his communication. On these new foundations, he will take over CFAO, SCOA, Conforama, Le Printemps, La Redoute, and FNAC. All exercises in high-flying, jumping from branch to branch between his different companies, to the great dismay of minority shareholders and relying on the generosity of Crédit Lyonnais..."

"In mid-June 1999, Pierre Godé asked Kroll France to verify if one of Kroll's offices in the United States had worked on the Executive Life Crédit Lyonnais case and if there were any exploitable information regarding François Pinault. This affair has been poisoning Franco-American relations since 1998. It all started with an anonymous denunciation by a French businessman. Crédit Lyonnais is accused of having set up, with the support of MAAF Assurances, a holding system to take over, in 1991, part of the assets of the bankrupt American insurance company Executive Life, particularly its heavily depreciated junk bond portfolio. However, American law at the time prohibited a bank from owning assets in the insurance sector."

"In March 1993, I flew to New York to meet François Gille, the multilingual managing director of Crédit Lyonnais, which now reluctantly owned MGM. After a leisurely conversation about the south of France and our mutual love of the region’s cuisine, we turned to the studio. Gille had met with eight leading investment banks. All offered the same advice: to deal with its $3.2 billion in troubled entertainment assets, the bank should break up MGM, lay off its 2,400 employees, and sell what assets were left, mainly the lion logo and sister studio United Artists’s 1,100-title film library. (MGM’s library already belonged to Ted Turner, and Lorimar already owned the famous studio lot.) On paper, that course seemed prudent, as the studio was burning through a million bucks a day. Total liquidation could shave the bank’s losses to $900 million. I said, “I have a different point of view. I think you should put another $150 million into MGM so it can start distributing movies again.” “And why would that be best?” “Because your bank wants to open branches in New York and do more business in America. It would be terrible public relations to fire more than a thousand Americans and plow the MGM name underground for good.” After letting that point sink in, I said, “I believe I can get you most of your money back, if not all of it.” CAA could jump-start the studio with a few movie packages, which would buy the French time to revive UA’s tent-pole franchises: Rocky, the Pink Panther, James Bond. New production would boost the older titles’ value. When Crédit Lyonnais eventually sold MGM, as required by the feds, it would get a much better price. Gille said, “No one else agrees with you.” I stayed impassive, but my heart leaped. In any multiplayer contest, you want to be the outlier. I told Gille, “Everyone you’ve met with is in the business of selling assets. But I’m in the business of building assets, and I think you are, too.” “You’ve given me a lot to think about,” he said."

"Without executive powers, the brothers seek to monetize their stake. They are approached by Worms Bank, already a shareholder with 10% and wishing to increase its stake. Fair players, they inform Bernard Arnault who also wishes to consolidate his relative majority. Under equal conditions, they agree to give preference to the latter. A negotiation meeting takes place on a Sunday at the office of the chairman Letartre. All four brothers are present, along with two of their wives. A fierce negotiation begins. The brothers value their stake at 600 million francs, equivalent to a value of 1,140 francs per share. Bernard Arnault chokes and stands firm on the figure of 250 francs which they had accepted during the sale of the first 20%. After long hours of discussion, the parties reach an agreement on the price of 760 francs per share, subject to the confirmation of support from Crédit Lyonnais to finance the operation and guarantee the sellers of the payment of the part of the settlement payable over time. The amount of the acquisition is to be paid over three years. Their stake is thus valued at 400 million francs. The four brothers sign the transfer slips for their shares. Confirmation of support from Crédit Lyonnais cannot be given until the following Monday evening at the earliest. The signed deeds and documents are entrusted to Michel Liagre, who will implement them only after receiving and verifying the commitments from Crédit Lyonnais."

"Bernard Arnault's strengthened participation in the Agache-Willot group will be housed in his new family holding, Arnault et Associés, in which Crédit Lyonnais will find its place along with other renowned investors."

"Bernard Arnault can thus perfect his control over the group and definitively sideline the brothers. It is thus the historic banker, Crédit Lyonnais, that intervenes at a time when, ironically, its president, Jean Deflassieux, is about to hand over his seat to Jean-Maxime Lévêque. A person well-acquainted with the case..."

"At the top of the network, Bernard Arnault places Arnault & Associés, the parent company of the whole (formerly Boussac, now Financière Agache et Férinel). The cornerstone of Bernard Arnault's financial construction, this company is the one that will benefit most from the restructuring carried out within the group. It not only receives dividends from the various subsidiaries of the group, but it is also the main owner of this heterogeneous structure which counts no less than ten companies, most of which are profitable. Arnault & Associés is controlled 60% by the Arnault family, the rest being held by a group of investors (Crédit Lyonnais, Duménil-Leblé, BNP, GAN, Finial...) (see table 1)."

"The threat of a raid is becoming increasingly clear. Alain Chevalier and Jean-Louis Masurel call on Bruno Roger for help. Together, they reflect on different means of deterrence and decide on an issuance of bonds with subscription warrants for shares (OBSA) on the eurofranc market. Shareholders waive their preferential subscription rights in favor of potential foreign investors whose names they don't even seek to know. The issuance is launched in mid-March 1987 under the direction of David Dautresme, managing partner of Lazard. The bank on Boulevard Haussmann takes the lead of the banking pool which includes Crédit Lyonnais, BNP, and Crédit Suisse-First Boston. Each bond, worth 10,000 francs, is accompanied by 18 warrants allowing subscription to Moët-Hennessy shares at 2,720 francs until April 1990. The bonds and warrants are listed separately. In total, the operation ultimately yields nearly 4 billion francs and potentially represents 18% of the group's capital."

"In this autumn of 1987, Bernard Arnault's attack plan is ready. His springboard will be Dior, his aircraft carrier, Crédit Lyonnais, his fighter jets, Lazard, and his various companies will serve as ammunition. As for his objective, it will be LVMH."

"One can well imagine their first conversation on the phone, one morning in early May: “Would you be interested in a stake in LVMH, Henry Racamier must have said, somewhat condescendingly.” “It would be a great honor, Bernard Arnault certainly replied in the tone of the greatest deference.” When the young boss of Dior hangs up, his smile is carnivorous. "I won," he probably thinks, before inviting his top executives to lunch. Bernard Arnault does not warn Antoine Bernheim. It is still premature. Lazard is already engaged with Chevalier. So he turns to Crédit Lyonnais for the occasion. A first meeting is scheduled with Henry Racamier's banker at the Dior headquarters."

"In fact, Alain Chevalier and Henry Racamier will only carry out one operation together, which will not succeed: the secret purchase of 10% of Hermès' capital through Crédit Lyonnais. A hostile operation that the president of Vuitton will carefully hide from Hermès' president, Jean-Louis Dumas. The veil will never be lifted, and Lyonnais will eventually resell this stake to the traditional bankers of the saddler."

"Mrs. Piniot recalls that Moët's management had committed to placing the warrants with foreign investors. However, she notes that more than two-thirds of the issued warrants were placed with French institutional investors who agreed to hold them for a certain period of time. These included the Caisse des dépôts et consignations, the Caisse nationale du Crédit Agricole, Crédit Lyonnais, BNP, and UAP. A memorandum of understanding was even considered to formalize this commitment. It was only signed by UAP. Therefore, Mrs. Piniot concludes that there was a "misuse of procedure harmful to minority shareholders." Even more serious, she emphasizes that Bernard Arnault was perfectly aware of this irregularity when he entered the capital of LVMH. When the head of Dior abandoned his takeover bid and opted for a less aggressive solution, Lazard bank assigned one of its partners, David Dautresme, to recover the maximum number of warrants and "negotiate the conditions of their transfer." The operations were carried out through a Luxembourg intermediary, Belmavobel International Securities. Thanks to these negotiations, Arnault obtained nearly 94% of the issued warrants, which ensured him nearly 12% of LVMH's capital."

"Widespread in the 1980s, the mechanism of Breton pulleys, which became the symbol of the emergence of "capitalism without capital," allowed certain French industrialists to significantly expand their empires without diluting their control, thanks to the support of banks and insurance companies that took minority stakes at various levels by accepting a relatively passive role. In the early 1980s, it was primarily the nationalized banks, especially Crédit Lyonnais, that participated in these setups."