Le Bon Marché

"The first mistake: like a sausage, Agache-Willot is cut into slices. Through the IDI, the State takes over the textile activities, while Dior, Le Bon Marché, and Conforama remain under the authority of the Willots. In other words, this division socializes losses and privatizes profits, a common practice of the right, strongly denounced by François Mitterrand when he was in opposition. Morally questionable, this division is also technically inept since it prevents the textile recovery from being supported by the profits of luxury and distribution."

"Arnault had chosen to diversify into distribution, a sector where he had a good base with furniture stores Conforama and Le Bon Marché."

"Initially, Financière Agache transferred its 86.5% stake in Conforama to one of its unlisted subsidiaries, IPS, whose main asset until then was a 20% stake in La Belle Jardinière. Then, IPS was absorbed by Le Bon Marché, which thus became the parent company of Conforama and the majority shareholder (75%) of La Belle Jardinière. This created a group "combining both commercial dynamism and control of significant real estate assets," according to the statement by Financière Agache, a group that investors should not turn their noses up at. Arnault expects them to subscribe later to a 2.4 billion franc capital increase for Le Bon Marché, the proceeds of which will be reinvested in Christian Dior."

"Simple in theory, the operation is actually much more complicated in practice2. In order to maintain control over Le Bon Marché, it is imperative that Arnault strengthens his majority in the company beforehand. How? Le Bon Marché, which is absorbing Conforama, must compensate for this contribution with new shares given to the contributor, namely Financière Agache. The larger the contribution in relation to the absorbing company, the more shares the contributor receives, and therefore the higher their participation in the new company. Thus, the operation is based on the evaluations of Conforama and Le Bon Marché. The former is given a flattering value corresponding to a share price that multiplies profits by 17.5, whereas the norm in the distribution sector is around 13-14. The latter, on the other hand, is not as impressive. Its buildings, which constitute its main asset, are evaluated based on a pessimistic price per square meter of around 20,000 francs, which seems low for the Sèvres-Babylone neighborhood where they are located. According to the expert commissioned by Financière Agache, their total value would be 1.2 billion. However, a few weeks earlier, Bernard Arnault himself had been more optimistic about Le Bon Marché in an interview with Fortune magazine: "The 100,000 square meters of floor space in the 16th arrondissement of Paris are worth at least 2 billion francs." In any case, the chosen method of calculation now allows him to control Le Bon Marché not at 65.53%, but at 89.96%."

"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."

"The Agache-Willot group indeed had, with its retail subsidiaries, Conforama and Le Bon Marché, its real estate companies: Belle Jardinière, its industrial real estate, its 4,500 homes, and its exceptional properties such as the Mivoisin estate, a considerable asset base generating significant income and free of mortgages. Indeed, 70% of the capital of the Conforama and Dior companies had been pledged to the banks since August 1980, but the direct competitors of the group, like DMC or the Prouvost group, are in an economic and financial situation that is hardly more brilliant without having such a considerable mass of assets."

"At Le Bon Marché, the fiscal year 1979 is marked by significant renovation works of the department store. Jean Lemonnier, the managing director, undertakes a complete makeover of the store located at the corner of rue du Bac and rue de Sèvres. The basement, entirely dedicated to DIY, has been expanded by 400 square meters. The 820-square-meter food self-service area on the ground floor becomes a 2,650-square-meter gourmet grocery supermarket that will draw all of Paris; it is La Grande Épicerie."