Corporate governance is for wimps. The big guys have higher concerns. Thales, the defence electronics group, is the latest victim of yet another of those self-destructive acts that are becoming the norm in French state-controlled companies.
Denis Ranque is set to lose his job next week as chief executive of Thales. Thales’ revenue doubled during his 10-year tenure and the company acquired an international footprint with major operations in the UK and the US. But Ranque fell foul of Dassault Aviation, which now owns 26 per cent of the shares, by insisting that Thales stick to its independent strategy. And the French government, which owns 27 per cent, has decided to do Dassault’s bidding. In substance, Dassault will have crept into a takeover of Thales.
The maker of Falcon jets bought its stake last November from troubled telecom equipment maker Alcatel-Lucent. At the time, the French stock market regulator ruled that Dassault didn’t need to make a full bid for the company – even though it was clearly acting in concert with the state, which had engineered a deal that provided little if any synergies.The regulator did attach a condition: that Dassault wouldn’t try to manage Thales, which is twice as large in both revenue and market capitalisation.
Dassault then soon got to work on doing precisely that, by trying to unseat Ranque. Its success shows that minority shareholders did deserve a full bid at the same 25 per cent premium to the market price that Dassault paid Alcatel-Lucent. The top job will now go to Dassault’s candidate, Luc Vigneron, currently the chief executive of a state-controlled military vehicles builder with a few hundred employees and less than 10 per cent of Thales’ revenues.
The Thales board committee which screened candidates let it be known that Vigneron was considered poorly qualified. No matter, he’ll take over. Even if Vigneron proves the sceptics wrong, the heavy handed selection process could hurt Thales’ standing as a French military contractor which had managed to break free of the state’s heavy embrace. And minority investors know what kind of respect they get from the state when it’s a dominant shareholder in a listed company: none at all.