Pargesa

"The rest of the year was spent consolidating the new Power Fi¬ nancial and getting its North American subsidiaries to work together, selling each others’ services where legally permitted. Another task was setting up the infrastructure for co-operation of Power Financial’s North American units, where it was practical and legally permitted, with Pargesa and its global financial-services subsidiaries, including Groupe Bruxelles Lambert and its New York investment house sub¬ sidiary, Drexel Burnham Lambert."

"Then Paribas announced in a full-page advertisement published in Switzerland’s major newspapers that it was growing and, as part of its growth plan, was seeking shares of Paribas (Suisse) valued at about sf400 each. The share acquisition was to be a swap: five Pargesa bearer shares worth sf5,000 for 11 Paribas (Suisse) shares valued at sf4,400, a 12-percent premium. Pargesa then offered holders of convertible bonds issued by the Paribas (Suisse) subsidiary Paribas Suisse (Bahamas) Ltd. —1 con¬ vertible to shares of Paribas (Suisse) — to trade them for Pargesa shares. The board of Paribas (Suisse), of which Moussa was a member (as were de Pfyffer and Gerard Eskenazi, co-president and director- general of Paribas, France), recommended that shareholders accept the offer. No one in the French government acted, because no one knew that during the negotiations before the introduction of the nationalization bill Moussa had allowed Paribas (Suisse) and Cobepa to buy control of each other. As far as the government was concerned, all was progressing normally; in fact, Paribas, France no longer owned control of Paribas (Suisse). Both offers expired on 26 October 1981, but by 22 October, a majority of the 40 percent of Paribas (Suisse) shares held by Warburg (20 percent) and Cobepa (20 percent) were offered to Pargesa; as well, the public shareholders had responded eagerly, tendering enough shares and bonds to ensure that Pargesa had Paribas (Suisse) in the bag. The next day, Pargesa was listed on the Geneva Bourse, and prices immediately rose to sf1,035. On 30 October, de Pfyffer an¬ nounced that 924,000 Paribas (Suisse) shares had been tendered to Pargesa for Pargesa shares. Pargesa had to increase its capitalization to sf700 million/us$346.5 million and increase its bearer share issues by 420,000 more shares to meet its obligations (as well as increase the sfIOO share issue proportionally), but had acquired 52.3 percent, absolute control of Paribas (Suisse) sa, even before converting the bonds for shares."

"The drawback to capturing and holding the defensive position is that it fosters a defensive attitude, often without the occupier’s re¬ alizing it. The occupier suddenly moves from anticipating events, trying to get ahead of them to see what awaits farther down the road, to a static position from which he reacts to events. All of Desmarais’s moves at this time — acquiring with borrowed money, running with a market that assumed oil prices and inflation would continue to rise, and piling up Power’s heavy debt — were reactive, reflecting an inflation-driven, conventional corporate wisdom. His buying into cp and establishing the Pargesa consortium seem proactive, but the CP purchase was made at the height of market prices, just as the global economy was sliding into a recession that forced a nosedive in share prices and dividends. Setting up Pargesa and shifting Paribas (Suisse) assets was business at its most activist, but it was still conducted in reaction to a situation that had been deemed possible but not probable until it was almost a fait accompli."