Safran faces AGM heat as revolt over French Florange law widens

Tue Apr 21, 2015 9:56am EDT
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By Tim Hepher

PARIS (Reuters) - Proxy advisory firms are threatening to block key financial resolutions at French aerospace group Safran (SAF.PA: Quote), opening a second front in a battle between the French government and institutional investors over a new corporate law.

The so-called Florange law is already at the center of a fierce debate over moves to introduce double voting rights for long-term shareholders in French companies to encourage stability.

Safran has been able to sidestep the row over "one share, one vote" at companies such as Renault (RENA.PA: Quote) because it already has a system of double-voting for long-term investors that operates smoothly.

But it is facing an investor revolt over a second, less publicized, provision of the law that grants more discretion to boards of French companies to repel takeover bids.

Proxies representing big investors say they will vote against resolutions granting share issuance authority at Safran's shareholder meeting on Thursday, because they fail to suspend board powers to issue shares whenever a bid is imminent.

Such share issues dilute a predator's stake and are seen by their critics as a form of "poison pill" that can hurt valuations. The government says clipping the wings of predators is part of its drive to focus on the "real economy".

"Poison pills limit the powers of decision of shareholders and it is not up to the board to decide for them," said Hugo Dubourg, corporate governance analyst at France's Proxinvest.

To many, the debate over Safran may seem academic: the maker of engines for France's nuclear missiles is already shielded by decrees protecting the defense sector from hostile bids.   Continued...

A view of Safran Composites, their new research center dedicated to next-generation aerospace materials in Itteville, near Paris, May 13, 2014.  REUTERS/Gonzalo Fuentes