Billionaire Arnault Buys Influence Through Media Deals in France
(Bloomberg) - When billionaire Bernard Arnault made global headlines last month trying to get his luxury empire LVMH out of a $ 16 billion deal to buy U.S. jeweler Tiffany & Co., a minor transaction by the richest man went ahead Europe largely went unnoticed in France.
Arnault's investment group acquired a more than 5% stake in Lagardere SCA, a once sprawling conglomerate that covers everything from automobiles and airplanes to space and is now focused on media, publishing and retail stores at airports and train stations. The purchase is a forerunner for the Arnault group to play a bigger role in these activities, according to people familiar with the discussions at the two companies.
Why would Arnault, known as France's most successful investment banker, after cleverly acquiring an armada of luxury brands - from Dior and Fendi to Louis Vuitton, Hennessy Cognac and Dom Perignon Champagne - want a piece of a struggling group like Lagardere?
For Arnault observers, it's all about political influence.
Lagardere's media inventory includes French brands such as Paris Match, a glossy photo magazine that has often increased the chances of presidential candidates, news channel Europe 1 and the influential weekly Le Journal du Dimanche. While the media unit loses money and has little weight outside of France, it has influence within the country, where business and politics are closely linked.
Arnault's formidable net worth - his net worth is $ 86 billion, according to the Bloomberg Billionaires Index - already makes him very influential in France. But more traction has never hurt anyone, said Remy Le Champion, co-director of the French Press Institute's journalism program at Paris-Assas University.
"Bernard Arnault has access to anyone he wants in government," he said. “Still, extremely rich people often have a hobbyhorse. The benefits of owning a medium largely make up for the relatively limited cost of a man with a net worth of $ 80 billion. "
Take the Tiffany case, for example. Arnault, who has expanded his media fortune over the years, has been able to turn to the French government for help with getting out of business. LVMH received a letter from Foreign Secretary Jean-Yves Le Drian requesting a delay in business over a US-France trade dispute that the company cited as the reason for the exit.
LVMH denied that it played a role in obtaining the letter, but Le Drian told Parliament that he had responded to a request from the company and stated in an interview that it was its "duty to protect French interests", effectively fusing the company's priorities with those of the country.
Arnault-controlled LVMH owns Les Echos, France's premier financial newspaper, and Le Parisien, Paris' staple food. The classical music lover also controls Radio Classique, a station that covers news in its morning programs.
"Being the owner of these newspapers gives him influence in the media and that means you want to let him off your back," said Julia Cage, professor of economics at Sciences Po in Paris, referring to Le Drian's letter .
The purchase of the Lagardere stake will allow the billionaire to deepen his media exposure and forge closer relationships between similar companies of the two companies, analysts at Oddo BHF wrote in a note. LVMH owns the DFS duty free store network and has a stake in the Madrigall Group, the owner of Gallimard, the publisher of authors such as Nobel Prize winner Patrick Modiano.
Arnault also plans to acquire a 40% stake in the press group behind influential business magazine Challenges, its boss Claude Perdriel told Le Monde this month.
"Media assets owned by industry officials, even if they are not interventionists, fuel suspicion and doubt," said Cage, chairman of a Le Monde readers' association, adding that it gives them an "oversized" leverage over the government.
Arnault isn't the only French billionaire investing in media assets. The telecommunications moguls Martin Bouygues and Patrick Drahi control or own their own channel TF1 and the 24-hour news channel BFM TV, while Xavier Niel also owns the daily newspaper Le Monde. The Dassault industrial family owns the Le Figaro newspaper, while Vincent Bollore and his group of the same name have a majority stake in Vivendi SA's CNews TV network and a stake in Lagardere.
The Internet age has disrupted the media business, shrinking its customer base and advertising revenue, and driving it into the arms of rich customers for the support of life. Over the past decade, the circulation of Lagarderes Paris Match - once France's best-selling news magazine - has dropped by 100,000 to just over 500,000.
For Arnault, who has funded a number of activities in France - € 200 million to rebuild Notre Dame de Paris cathedral, which burned out in a fire last year, and contemporary art exhibitions at his Fondation Louis Vuitton - the purchase of the Lagardere -Pfahls is also an opportunity to support a former French industrial group.
The conglomerate was founded by Jean-Luc Lagardere, who was Arnault's tennis partner until his death in 2003. It was in troubled waters, and Jean-Luc's son Arnaud Lagardere was attacked by activist Amber Capital for more than two years.
The investment "underscores our solidarity with the integrity and development of Lagardere," Groupe Arnault said in its September 24 statement. She declined to comment on Arnault's media ambitions or any analysis suggesting he was gaining political influence.
Billionaire's push for media goods is less about making money and more about controlling the narrative at home, Paris-Assas' Le Champion said.
Controversy arose in 2016 when Les Echos and Le Parisien decided not to publish a review of the documentary "Merci Patron" (Thanks Boss). The documentary made by Francois Ruffin, a left-wing activist turned MP, was a criticism of LVMH and the power of the rich. A year later, Les Echos journalists criticized an editorial decision to take Ruffin's name out of a play written by a columnist.
Even so, many say in Arnault's publications that there have been few examples of censorship. Pierre Louette, chairman of the Les Echos-Le Parisien group, described his connections with the owner as "natural, fluid and normal".
Still, Les Echos carelessly responded to the question of whether LVMH had relied on the government to get out of the Tiffany deal, saying instead that it was "collateral damage" in the trade war between France and the US.
"I don't think anyone will pick up the phone and complain to reporters when Bernard Arnault doesn't like a story in Les Echos," said Le Champion. "Rather, we are talking about subtle influences, assumptions and self-imposed limits."
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