France’s state-backed BPI raises ‘lake of cash’ for stakes in domestic companies

Via Financial Times

France’s state-backed investment bank BPI has identified a “handful” of listed companies in which it plans to buy stakes worth up to €1bn in the coming months as a new fund intended to back domestic companies swings into action.

The first round of the fund, which has been dubbed the lac d’argent, or “lake of cash”, has closed with €4.2bn in pledges, including €1bn from the Abu Dhabi sovereign wealth fund Mubadala Investment Company and another €1bn from French insurers such as Covea and Axa.

Nicolas Dufourcq, who leads the BPI, said in an interview that a further international roadshow targeting family offices, sovereign funds and other institutional investors would aim to raise additional capital that would take the fund to €10bn.

However, Mr Dufourcq rejected the idea, floated last year by finance minister Bruno Le Maire, that the fund was a way for France to defend its companies against activist investors.

“I don’t even understand the concept,” he said. “We are not some sort of white knight fund.” He added that the BPI would choose which companies to invest in independently, without any interference from the government.

“France doesn’t have pension funds, so we’re doing the job. There is not enough patient capital here so that’s what we want to be, all the while earning a return for our investors.”

There was an uptick in activist campaigns at French companies last year, prompting the government to ask the markets regulator AMF to examine whether regulatory changes were needed. Activist investor Elliott Management was targeting spirits company Pernod Ricard, Amber Capital was pushing for change at Lagardère, and Ciam at insurer Scor.

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US-style activist campaigns have become more common across Europe in recent years. According to investment bank Lazard, there were 28 activist campaigns across Europe in 2013, climbing to 57 in 2018 and about 40 in 2019.

The AMF recently issued a report calling for improved disclosures by both short-sellers and activist investors.

Mr Dufourcq said the fund would invest anywhere from €150m to €1bn in companies listed on France’s blue-chip CAC 40 index or the SBF 120 index of medium-sized companies. It would always negotiate with companies before making the investments, since it wanted to be on the board, and planned to hold the stakes for up to seven years, he said.

Separately, Mr Dufourcq said the BPI had, to date, helped back €78bn in loans to 470,000 small and medium-sized businesses hit by the Covid-19 crisis. The loans are guaranteed by the state at 90 per cent, instead of the usual 50 to 70 per cent, and run for up to six years. They tend to cover about two to three months of expenses for companies and the average loan size has been €150,000.

“I expect we will end up giving out €100bn with no problem,” he said. “It has been a totally new and very successful programme that has given out more than similar ones in Germany and Italy.”

Germany’s KfW, the state development bank, has received applications from businesses for loans worth €46bn, and so far has disbursed €26bn.

“The loans give breathing room to French companies as they deal with the Covid crisis,” said Mr Dufourq.

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Additional reporting by Guy Chazan in Berlin